SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted by
[_] Definitive Proxy Statement Rule 14a6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[INTEGRA LIFESCIENCES LOGO]
311C ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 15, 2001
To the Stockholders of Integra LifeSciences Holdings Corporation:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting (the "Meeting") of the
Stockholders of Integra LifeSciences Holdings Corporation (the "Company") will
be held as, and for the purposes, set forth below:
TIME 9:00 a.m. on Tuesday, May 15, 2001
PLACE Princeton Holiday Inn
4355 Ridge Road at Route 1
Princeton, New Jersey 08540
ITEMS OF BUSINESS 1. To elect six directors of the Company to hold
office as specified in the accompanying Proxy
Statement.
2. To consider and vote upon a proposal to approve
and adopt the Company's 2001 Equity Incentive
Plan.
3. To consider and vote upon a proposal to ratify and
approve all actions taken by the Board of
Directors on February 16, 2000 in connection with
an amendment to the Company's Certificate of
Designation, Rights and Preferences of Series B
Convertible Preferred Stock, the purpose of which
was to ensure that the rights and preferences of
the Series B Convertible Preferred Stock would be
substantially identical to the rights and
preferences of the Series C Convertible Preferred
Stock.
4. To consider and vote upon a proposal to approve an
amendment to the Company's Certificate of
Designation, Rights and Preferences of Series B
Convertible Preferred Stock, the purpose of which
is to make certain changes to clarify the
numbering of certain paragraphs and internal
references contained therein.
5. To consider and vote upon a proposal to approve an
amendment to the Company's Certificate of
Designation, Rights and Preferences of Series C
Convertible Preferred Stock, the purpose of which
is to make certain changes to clarify the
numbering of certain paragraphs and internal
references contained therein.
6. To ratify the appointment of
PricewaterhouseCoopers LLP as the Company's
auditors for the current fiscal year.
7. To act upon any other matters properly coming
before the meeting or any adjournment or
postponement thereof.
RECORD DATE Holders of record of the Company's Common Stock, Series
B Convertible Preferred Stock and Series C Convertible
Preferred Stock at the close of business on April 9,
2001 are entitled to notice of, and to vote at, the
Meeting and any adjournment or postponement thereof. A
complete list of stockholders entitled to vote at the
Meeting will be available for inspection by any
stockholder for any purpose germane to the Meeting for
ten days prior to the Meeting during ordinary business
hours at the Company's headquarters located at 311C
Enterprise Drive, Plainsboro, New Jersey.
ANNUAL REPORT The 2000 Annual Report of Integra LifeSciences
Holdings Corporation is being mailed simultaneously
herewith. The Annual Report is not to be considered
part of the proxy solicitation materials.
IMPORTANT In order to avoid additional soliciting expense to the
Company, please MARK, SIGN, DATE and MAIL your proxy
PROMPTLY in the return envelope provided, even if you
plan to attend the Meeting. If you attend the Meeting
and wish to vote your shares in person, arrangements
will be made for you to do so.
By order of the Board of Directors,
/s/John B. Henneman, III
Plainsboro, New Jersey John B. Henneman, III
April 20, 2001 SECRETARY

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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311C ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2001
PURPOSE OF MEETING
This Proxy Statement is being furnished to holders of common stock
("Common Stock"), Series B Convertible Preferred Stock ("Series B Preferred
Stock") and Series C Convertible Preferred Stock ("Series C Preferred Stock" and
together with the Series B Preferred Stock, the "Preferred Stock") of Integra
LifeSciences Holdings Corporation (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company from such
stockholders for use at the 2001 annual meeting of stockholders of the Company
(the "Meeting") to be held on Tuesday, May 15, 2001 at 9:00 a.m. local time at
the Princeton Holiday Inn, Princeton, New Jersey and at any adjournment or
postponement thereof. This Proxy Statement, the enclosed Notice of Annual
Meeting of Stockholders and the form of proxy are first being mailed to
stockholders of the Company on or about April 20, 2001.
At the Meeting, the stockholders of the Company will be asked to
consider and vote upon:
(i) the election of six directors to serve until the next annual
meeting of stockholders and until their successors are duly elected and
qualified (see "Proposal 1. Election of Directors");
(ii) a Proposal to approve and adopt the Company's 2001 Equity
Incentive Plan (see "Proposal 2. 2001 Equity Incentive Plan");
(iii) a Proposal to ratify and approve all actions taken by the
Board of Directors on February 16, 2000 in connection with an amendment to the
Certificate of Designation, Rights and Preferences of the Company's Series B
Preferred Stock, the purpose of which was to ensure that the rights and
preferences of the Series B Convertible Preferred Stock would be substantially
identical to the rights and preferences of the Series C Convertible Preferred
Stock (see "Proposal 3. Ratification of February 16, 2000 Amendment to the
Certificate of Designation, Rights and Preferences of the Company's Series B
Preferred Stock");
(iv) a Proposal to approve an amendment to the Certificate of
Designation, Rights and Preferences of the Company's Series B Preferred Stock,
the purpose of which is to make certain changes to clarify the numbering of
certain paragraphs and internal references contained therein (see "Proposal 4.
Approval of Amendment to the Certificate of Designation, Rights and Preferences
of the Company's Series B Preferred Stock");
(v) a Proposal to approve an amendment to the Certificate of
Designation, Rights and Preferences of the Company's Series C Preferred Stock,
the purpose of which is to make certain changes to clarify the numbering of
certain paragraphs and internal references contained therein (see "Proposal 5.
Approval of Amendment to the Certificate of Designation, Rights and Preferences
of the Company's Series C Preferred Stock"); and
(vi) the ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's auditors for the current fiscal year (see "Proposal 6.
Ratification of Auditors").

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The Board knows of no matters that will be presented for
consideration at the Meeting other than those matters set forth in the Notice of
Annual Meeting of Stockholders. If any other matters are properly presented at
the Meeting or any postponement or adjournment thereof, the persons named in the
enclosed proxy and acting thereunder will have authority to vote on such
matters, to the extent permitted by the rules of the Securities and Exchange
Commission (the "Commission"), in accordance with the judgment of the persons
voting such proxies.
RECORD DATE
Only stockholders of record as of the close of business on April 9,
2001 (the "Record Date") will be entitled to notice of, and to vote at, the
Meeting or at any adjournment or postponement thereof. As of the Record Date,
there were outstanding 17,642,155 shares of Common Stock, 100,000 shares of
Series B Preferred Stock (which are currently convertible into 2,617,801 shares
of Common Stock) and 54,000 shares of Series C Preferred Stock (which are
currently convertible into 600,000 shares of Common Stock), which constituted
the only outstanding securities of the Company entitled to vote.
VOTING AND REVOCABILITY OF PROXIES
On each matter voted upon at the Meeting and any adjournment or
postponement thereof, holders of Common Stock and Preferred Stock will vote
together as a single class. In addition, with respect to the Proposal to ratify
and approve all actions taken by the Board of Directors on February 16, 2000 in
connection with an amendment to the Certificate of Designation, Rights and
Preferences of the Company's Series B Preferred Stock and the Proposal to
approve an amendment to the Certificate of Designation, Rights and Preferences
of the Company's Series B Preferred Stock, the holders of the Series B Preferred
Stock are entitled to vote separately as a class. With respect to the Proposal
to approve an amendment to the Certificate of Designation, Rights and
Preferences of the Company's Series C Preferred Stock, the holders of the Series
C Preferred Stock are entitled to vote separately as a class.
Each share of Common Stock entitles the holder of record thereof to
one vote, each share of Series B Preferred Stock entitles the holder thereof to
26 votes and each share of Series C Preferred Stock entitles the holder thereof
to 11 votes. Each stockholder may vote in person or by properly executed proxy
on all matters that properly come before the Meeting and any adjournment or
postponement thereof. The presence, in person or by proxy, of stockholders
entitled to vote a majority of the shares of Common Stock and Preferred Stock
outstanding on the Record Date will constitute a quorum for purposes of voting
at the Meeting. Where a separate vote by a class is required, the presence, in
person or by proxy, of stockholders entitled to vote a majority of the shares of
such class outstanding on the Record Date will constitute a quorum for purposes
of voting at the Meeting.
Directors are to be elected by the affirmative vote of the holders
of a plurality of the issued and outstanding shares of Common Stock and
Preferred Stock present, in person or by proxy, at the Meeting and entitled to
vote. Cumulative voting in the election of directors is not permitted. The
affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock and Preferred Stock present, in person or by proxy, at
the Meeting and entitled to vote is required to approve and adopt the 2001
Equity Incentive Plan and to ratify the appointment of PricewaterhouseCoopers
LLP as the Company's auditors for the current fiscal year. The affirmative vote
of the holders of a majority of the issued and outstanding shares of Common
Stock and Preferred Stock entitled to vote thereon voting as a single class and
the affirmative vote of the holders of two-thirds of the issued and outstanding
shares of Series B Preferred Stock entitled to vote thereon voting as a separate
class is required to ratify and approve all actions taken by the Board of
Directors on February 16, 2000 in connection with an amendment to the
Certificate of Designation, Rights and Preferences of the Company's Series B
Preferred Stock and to approve an amendment to the Certificate of Designation,
Rights and Preferences of the
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Company's Series B Preferred Stock. The affirmative vote of the holders of a
majority of the issued and outstanding shares of Common Stock and Preferred
Stock entitled to vote thereon voting as a single class and the affirmative vote
of the holders of two-thirds of the issued and outstanding shares of Series C
Preferred Stock entitled to vote thereon voting as a separate class is required
to approve an amendment to the Certificate of Designation, Rights and
Preferences of the Company's Series C Preferred Stock.
The enclosed proxy is being solicited by the Board of Directors for
use in connection with the Meeting and any postponement or adjournment thereof.
All properly executed proxies received prior to or at the Meeting or any
postponement or adjournment thereof and not revoked in the manner described
below will be voted in accordance with the instructions indicated on such
proxies. If no instructions are indicated, such proxies will be voted "FOR" the
approval and adoption of each of the proposals set forth herein.
If a proxy is marked as "Withhold Authority" or "Abstain" on any
matter, or if specific instructions are given that no vote be cast on any
specific matter (a "Specified Non-Vote"), the shares represented by such proxy
will not be voted on such matter. Abstentions will be included within the number
of shares present at the Meeting and entitled to vote for purposes of
determining whether such matter has been authorized, but nominee and other
Specified Non-Votes will not be so included.
If a quorum for the Meeting is not obtained or, as to any one or
more proposals, if fewer shares are voted in favor of the Proposal than the
number of shares required for such approval, the Meeting may be adjourned for
the purpose of obtaining additional proxies or votes or for any other purpose.
At any subsequent reconvening of the Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original meeting
(except for any proxies that have theretofore effectively been revoked or
withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting. Proxies voting against a
Proposal set forth herein will not be used to adjourn the Meeting to obtain
additional proxies or votes with respect to such proposal.
Proxies may be revoked by those persons executing the proxies by (a)
delivering to the Secretary of the Company at or before the Meeting a written
notice of revocation bearing a later date than the proxy, (b) duly executing a
subsequent proxy relating to the same shares of Common Stock or Preferred Stock
and delivering it to the Secretary of the Company at or before the Meeting or
(c) attending the Meeting and voting in person (although attendance at the
Meeting will not in and of itself constitute revocation of a proxy). Any written
notice revoking a proxy should be delivered at or prior to the Meeting to:
Secretary, Integra LifeSciences Holdings Corporation, 311C Enterprise Drive,
Plainsboro, New Jersey 08536.
All expenses of this solicitation, including the cost of preparing
and mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mail, proxies may be solicited by telephone,
telegraph or personally by the directors, officers and employees of the Company,
who will receive no extra compensation for their services. The Company will
reimburse banks, brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy soliciting materials
to beneficial owners of shares of Common Stock.
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PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as
directors whose terms will expire at the 2002 Annual Meeting of Stockholders, or
when their successors are elected and qualified. The proxies cannot be voted for
a greater number of persons than the following nominees: Keith Bradley, Ph.D.,
Richard E. Caruso, Ph.D., Stuart M. Essig, George W. McKinney, III, Ph.D., Neal
Moszkowski and James M. Sullivan, each of whom are currently directors of the
Company. Mr. Moszkowski is the nominee of the holders of the Company's Series B
Preferred Stock, who have the right to nominate one designee to the Company's
Board of Directors so long as the original purchasers retain at least one half
of their initial investment in the Series B Preferred Stock.
If any nominee should be unable to serve as director, an event not
now anticipated, it is intended that the shares of Common Stock and Preferred
Stock represented by proxies will be voted for the election of such substitute
as the Board of Directors may nominate. Set forth below is certain information
with respect to the persons nominated as directors of the Company.
KEITH BRADLEY, PH.D. has been a director of the Company since 1992.
He is the Professor of Management at The City University Business School,
London, England, and a Director of Ockham Holdings plc, a London Stock Exchange
corporation. Dr. Bradley was the founder and formerly Executive Director of the
London School of Business Performance Group, an interdisciplinary research
institute which specializes in organizational performance. He has extensive
experience as a consultant to a variety of business, government and
international organizations and has published widely on management and
industrial policy. Dr. Bradley has served as Visiting Professor at Harvard
Business School, the UCLA Graduate School of Management and the Wharton School
of the University of Pennsylvania. Dr. Bradley received a Diploma in Education
from Culham College and a Ph.D. degree in Economics from the University of
Essex. Dr. Bradley is 56 years old.
RICHARD E. CARUSO, PH.D. has served as the Company's Chairman since
March 1992. Prior to December 1997, Dr. Caruso served as the Company's Chief
Executive Officer since March 1992 and as the Company's President since
September 1995. From 1969 to 1992, Dr. Caruso was a principal of LFC Financial
Corporation, a project finance company, where he was also a director and
Executive Vice President. Dr. Caruso is on the Board of Susquehanna University,
The Baum School of Art and The Uncommon Individual Foundation (Founder). He
received a B.S. degree from Susquehanna University, an M.S.B.A. degree from
Bucknell University and a Ph.D. degree from the London School of Economics,
University of London (United Kingdom). Dr. Caruso is 57 years old.
STUART M. ESSIG has served as President and Chief Executive Officer
and as a director of the Company since December 1997. Prior to joining the
Company, Mr. Essig supervised the medical technology practice at Goldman, Sachs
& Co. as a managing director. Mr. Essig had ten years of broad health care
experience at Goldman Sachs serving as a senior merger and acquisitions advisor
to a broad range of domestic and international medical technology,
pharmaceutical and biotechnology clients. Mr. Essig received an A.B. degree from
the Woodrow Wilson School of Public and International Affairs at Princeton
University and an M.B.A. and a Ph.D. degree in Financial Economics from the
University of Chicago, Graduate School of Business. Mr. Essig also serves as a
director of Vital Signs, Incorporated and St. Jude Medical Corporation. Mr.
Essig is 39 years old.
GEORGE W. MCKINNEY, III, PH.D. has served the Company as Executive
Vice President and Chief Operating Officer since May 1997 and as a member of the
Board of Directors since December 1992. Between 1997 and 1999, Dr. McKinney also
served as Vice Chairman of the
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Company's Board of Directors. Between 1990 and 1997, Dr. McKinney was Managing
Director of Beacon Venture Management Corporation, a venture capital firm.
Between 1992 and 1997, Dr. McKinney also served as President and Chief Executive
Officer of Gel Sciences, Inc. and GelMed, Inc., a privately held specialty
materials firm with development programs in both the industrial and medical
products fields. From 1983 to 1989, Dr. McKinney was a Managing Director at
American Research & Development, a venture capital firm. Before 1990, Dr.
McKinney held other positions in the venture capital industry, was President and
Chief Executive Officer of American Superconductor, Inc., and served in various
manufacturing, engineering and financial positions at Corning, Inc. Dr. McKinney
holds an B.S. in Management from MIT and a Ph.D. in Strategic Planning from
Stanford University. Dr. McKinney is 57 years old. Dr. McKinney announced in
February 2001 that he will step down as Executive Vice President and Chief
Operating Officer when his employment agreement expires on December 31, 2001.
Dr. McKinney plans to be available as a consultant to the Company through June
30, 2002.
NEAL MOSZKOWSKI has been a director of the Company since March 1999
and is the designee of the holders of the Company's Series B Preferred Stock.
Mr. Moszkowski has been a partner of Soros Private Equity Partners LLC since
August 1998 and is currently an employee of Soros Private Funds Management LLC.
Prior thereto, Mr. Moszkowski was an Executive Director of Goldman Sachs
International and a Vice President of Goldman, Sachs & Co. in its Principal
Investment Area, which he joined in August 1993. He received a B.A. degree from
Amherst College and an M.B.A. degree from Stanford University. Mr. Moszkowski
also serves as a director of Bluefly, Inc. and MedicaLogic/Medscape, Inc. Mr.
Moszkowski is 35 years old.
JAMES M. SULLIVAN has been a director of the Company since 1992.
Since 1986, he has held several positions with Marriott International, Inc. (and
its predecessor, Marriott Corp.), including Vice President of Mergers and
Acquisitions, and his current position of Executive Vice President of
Development for the Lodging Group of Marriott. From 1983 to 1986, Mr. Sullivan
was Chairman, President and Chief Executive Officer of Tenly Enterprises, Inc.,
a privately held company operating 105 restaurants. Prior to 1983, he held
senior management positions with Marriott Corp., Harrah's Entertainment, Inc.,
Holiday Inns, Inc., Kentucky Fried Chicken Corp. and Heublein, Inc. He also was
employed as a senior auditor with Arthur Andersen & Co. and currently serves as
a director of Global Vacation Group, Inc. Mr. Sullivan received a B.S. degree in
Accounting from Boston College and an M.B.A. degree from the University of
Connecticut. Mr. Sullivan is 57 years old.
THE BOARD OF DIRECTORS HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE ELECTION OF EACH NOMINEE FOR DIRECTOR.
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held five formal meetings during 2000. During
2000, all incumbent directors attended in person or by conference telephone at
least 75% of the total number of meetings of the Board of Directors and
committees of the Board on which they served during their incumbency. The
Company has a standing Audit Committee, Compensation Committee and Equity Award
Committee of its Board of Directors.
The Audit Committee is comprised entirely of nonemployee,
independent members of the Board of Directors and operates under a written
charter adopted by the Board of Directors. A copy of the Charter of the Audit
Committee is attached as APPENDIX D. The Audit Committee assists the Board of
Directors in fulfilling its responsibilities of ensuring that management is
maintaining an adequate system
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of internal controls such that there is reasonable assurance that assets are
safeguarded and that financial reports are properly prepared, that there is
compliance with management's policies and procedures, and that there is
consistent application of generally accepted accounting principles, makes
recommendations to the Board of Directors regarding the selection of independent
accountants; and reviews the results and scope of the audit and other services
provided by the Company's independent accountants. During 2000, the Audit
Committee was comprised of Mr. Bradley, Mr. Sullivan and Mr. Moszkowski and met
four times.
The Compensation Committee makes decisions concerning salaries and
incentive compensation for employees and consultants of the Company. During
2000, the Compensation Committee was comprised of Drs. Bradley and Caruso and
Mr. Moszkowski and met twice.
The Equity Award Committee makes decisions concerning issuance of
stock options and other equity awards to employees and consultants of the
Company and also administers the Company's 2000 Equity Incentive Plan, the
Company's 1992, 1998 and 1999 Stock Option Plans, the Company's 1993 and 1996
Incentive Stock Option and Non-Qualified Stock Option Plans, the Company's
Employee Stock Purchase Plan and Deferred Compensation Plan (collectively, the
"Approved Plans") and, if approved by the stockholders at the Meeting, the
Company's 2001 Equity Incentive Plan. During 2000, the Equity Award Committee
was comprised of Dr. Bradley and Mr. Moszkowski and met four times.
COMPENSATION OF DIRECTORS
In 2000, the Company paid $27,500 to Dr. Caruso and granted him
options to purchase 15,000 shares of Common Stock under the 1998 Stock Option
Plan for his service as Chairman of the Board of Directors. Additionally, in
2000, the Company granted each of its other non-employee directors options to
purchase 10,000 shares of Common Stock under the 1998 Stock Option Plan as
compensation for their service on the Board of Directors. The Company did not
pay any cash compensation to its other directors for their service as directors.
The Company also pays reasonable travel and out-of-pocket expenses incurred by
non-employee directors in connection with attendance at meetings to transact the
business of the Company or attendance at meetings of the Board of Directors or
any committee thereof.
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PROPOSAL 2. 2001 EQUITY INCENTIVE PLAN
The Board of Directors believes that an equity incentive plan
enhances the ability of the Company to attract and retain officers and other
employees (collectively, "Eligible Employees") and directors, consultants, and
certain other non-employees (together with the Eligible Employees, the "Eligible
Individuals") and to motivate them to exercise their best efforts on behalf of
the Company, any subsidiary or parent of the Company (a "Related Corporation"),
or any affiliate of the Company or a Related Corporation. As of January 31,
2001, there remained less than 350,000 shares of Common Stock available for
grant as equity-based awards under the Approved Plans, which the Board of
Directors does not believe will be adequate to meet the anticipated number of
grants of equity-based awards for the upcoming year. Accordingly, the Board of
Directors proposes and recommends that the stockholders approve the Company's
2001 Equity Incentive Plan (the "Plan"), which the Board of Directors approved
on February 22, 2001, subject to stockholder approval. Stockholder approval of
the Plan is necessary in order to preserve full deductibility of performance
based awards under the Plan. In addition, stockholder approval is required in
order to grant incentive stock options ("ISO"), within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") under the
Plan.
The text of the Plan is attached as APPENDIX A to this Proxy
Statement. The following description of the Plan is intended merely as a summary
of its principal features and is qualified in its entirety by reference to the
Plan itself. On March 30, 2001, the closing price of a share of the Common Stock
on the Nasdaq National Market was $13.625.
1. NUMBER OF SHARES. The total number of shares of Common Stock
that can be delivered under the Plan is 2,000,000. No individual may receive
options and/or stock appreciation rights for more than 1,000,000 shares of
Common Stock during any calendar year under the Plan. If any award that requires
the participant to exercise it in order for shares of Common Stock to be
delivered terminates without having been exercised in full, or if any award
payable in cash or shares of Common Stock is paid in cash rather than shares,
the number of shares of Common Stock as to which such award was not exercised or
for which cash was paid will continue to be available for future awards. In
addition, the aggregate fair market value (determined at the time the option is
granted) of shares of Common Stock with respect to which ISOs are exercisable
for the first time by any participant during a calendar year (under the Plan and
under any other ISO plan of the Company or a Related Corporation) may not exceed
$100,000. The shares of Common Stock issued under the Plan may be authorized but
unissued shares or reacquired shares, and the Company may purchase shares
required for this purpose, from time to time, if it deems such purchase to be
advisable.
2. ADMINISTRATION. The Plan will be administered by the Company's
Equity Award Committee, which consists of not fewer than two directors of the
Company's Board of Directors who are designated by the entire Board of
Directors. Under the Plan, the Equity Award Committee will have the authority
(i) to select the Eligible Individuals to be granted awards under the Plan, (ii)
to grant awards on behalf of the Company, and (iii) to set the terms of such
awards. Currently, the members of the Equity Award Committee are Keith Bradley,
Ph.D. and Neal Moszkowski.
3. ELIGIBILITY. Only Eligible Employees of the Company or a
Related Corporation are eligible to receive ISOs under the Plan. Other types of
awards may be granted to all Eligible Individuals. As of the date of this Proxy
Statement, there are approximately 460 Eligible Employees of the Company and
Related Corporations eligible to receive ISOs and approximately 510 Eligible
Individuals (including Eligible Employees) eligible to receive other types of
awards. The benefits that will be received under the Plan by the Company's
current executive officers, directors and all other Eligible Individuals are not
currently determinable.
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4. TERM OF PLAN. The Plan by its terms has no expiration date.
However, no ISO may be granted under the Plan after February 21, 2011, although
ISOs outstanding on February 21, 2011 may extend beyond that date.
5. STOCK OPTIONS. The Plan permits the Equity Award Committee to
grant options that qualify as ISOs under the Code, and stock options that do not
so qualify ("nonqualified stock options" or "NQSOs"). The Equity Award Committee
determines the exercise price of each option. However, the exercise price of an
ISO may not be less than 100% of the fair market value of the shares of Common
Stock on the date of grant (110% in the case of an ISO granted to a
greater-than-10% stockholder). The exercise price of any option may not be less
than the par value of the shares. The Equity Award Committee may not reduce the
exercise price of an option after it is granted. For purposes of the Plan, the
per share fair market value of the Company's Common Stock on the relevant date
equals the quoted closing price on such date.
The term of each option will be fixed by the Equity Award Committee,
but may not exceed 10 years from the date of grant. The maximum term of each
option is reduced to 5 years from the date of grant in the case of an ISO
granted to a stockholder owning, directly or indirectly, more than 10% of the
total combined voting power of all classes of the Company's capital stock (a
"Greater-Than-10% Stockholder"). The Equity Award Committee will determine at
what time or times each option may be exercised; however, no option may be
exercisable less than three months after its grant. Options may be made
exercisable in installments, and the Equity Award Committee may accelerate the
exercisability of options.
The exercise price of an option granted under the Plan may be paid
in full (i) in cash or by check, bank draft, or money order, (ii) in shares of
Common Stock previously acquired by the participant (subject to certain holding
period requirements), (iii) in shares of Common Stock acquired upon exercise of
the option, (iv) by delivery of an irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(v) by any combination of the foregoing.
With the consent of the participants, the Equity Award Committee may
cancel any or all options and grant substitute options therefore. However, no
substitute options shall be granted within six months before or after the
cancellation of any option. Any substitute options shall be granted at their
then fair market value or par value, whichever is greater. The Equity Award
Committee may also permit an Optionee to voluntarily surrender all or any
portion of an option as a condition to the grant of a new option. The terms of
any such new option shall be set by the Equity Award Committee under the terms
of the Plan without regard to the terms of the surrendered option.
6. STOCK APPRECIATION RIGHTS. The Equity Award Committee may
grant stock appreciation rights, either alone or in tandem with options,
entitling the participant upon exercise to receive an amount in cash and/or
shares of Common Stock (as determined by the Equity Award Committee), measured
by the increase since the date of grant in the value of the shares covered by
such right. Stock appreciation rights granted in tandem with options will be
exercisable only at such times, and to the extent, that the related option is
exercisable and will terminate upon the exercise of the related option. The
Equity Award Committee may accelerate the dates on which stock appreciation
rights not granted in tandem with stock options may be exercised.
7. RESTRICTED STOCK. The Equity Award Committee may grant shares
of Common Stock to participants either with or without any required payment by
the participant, subject to such restrictions as the Equity Award Committee may
determine. The Equity Award Committee may accelerate the dates on which the
restrictions will lapse. Prior to the lapse of restrictions on shares of
restricted stock, the participant will have voting and dividend rights on the
shares. Any participant who
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makes an election under Section 83(b) of the Code with respect to restricted
stock (regarding the immediate recognition of income) must provide a copy
thereof to the Company within 10 days of the filing of such election with the
Internal Revenue Service.
8. PERFORMANCE STOCK. The Equity Award Committee may grant awards
entitling a participant to receive shares of Common Stock without payment
provided certain performance criteria are met. In determining the performance
criteria applicable to a grant of performance stock, the Equity Award Committee
may use one or more of the following criteria (the "Performance Criteria"):
- return on assets; - return on net assets;
- asset turnover; - return on equity;
- return on capital; - economic value added;
- market price appreciation - total stockholder return;
of the Company's Common Stock; - pre-tax income;
- net income; - operating profit margin;
- earnings per share; - sales margin;
- net income margin; - market share;
- cash flow; - sales growth;
- inventory turnover; - diversity;
- capacity utilization; - quality; and/or
- increase in customer base;
- environmental health and safety.
The business criteria selected by the Equity Award Committee may be
expressed in absolute terms or relative to the performance of other companies or
an index.Any conditions in an award of performance stock may be waived or
modified by the Equity Award Committee at any time.
9. CONTRACT STOCK. The Equity Award Committee may grant shares of
Common Stock to participants, conditioned upon the participant's continued
provision of services to the Company through the date specified in the award.
The Equity Award Committee has discretion to determine the number of shares of
Common Stock to be granted and to establish the contract date on which such
shares will be delivered to the participant. If the participant is still
providing services to the Company on the contract date, the Equity Award
Committee must deliver the shares of Common Stock specified in the award in
accordance with the terms thereof.
10. DIVIDEND EQUIVALENT RIGHTS. The Equity Award Committee may
grant awards that entitle the participant to receive a benefit in lieu of cash
dividends that would have been payable on any or all shares of Common Stock
subject to another award granted to the participant had such shares been
outstanding.
11. LOANS. The Equity Award Committee may authorize a loan from
the Company to a participant, either on the date of or after the grant of any
award to the participant (except that the ability of the Equity Award Committee
to authorize a loan in connection with an ISO must be included in the
participant's award agreement at the time of the award). A loan may be made
either in connection with the purchase of shares of Common Stock under the award
or with the payment of any Federal, state, or local income tax with respect to
income recognized as a result of the award. The Equity Award Committee has full
authority to decide whether to make a loan and to determine the amount, terms,
and conditions of the loan. However, the loan must be made on the participant's
personal, negotiable, demand promissory note, and the interest rate may not be
lower than the lowest rate that will avoid the imputation of interest under the
Code.
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12. TRANSFERABILITY. No ISO granted under the Plan may be
transferred other than by will or by the laws of descent and distribution. Any
other award may be transferred to the extent permitted by law, except as
otherwise provided in the award agreement. During a participant's lifetime, an
award requiring exercise may be exercised only by the participant (or, in the
event of the participant's incapacity, by the person or persons legally
appointed to act on the participant's behalf).
13. TREATMENT OF AWARDS UPON TERMINATION OF SERVICE. If a
participant's service (as an employee, consultant, director, or otherwise)
terminates by reason of death or disability, all options and stock appreciation
rights then held by the participant that were not exercisable immediately prior
to such termination of service will terminate on that date (except as otherwise
determined by the Equity Award Committee). Any remaining options and stock
appreciation rights will remain exercisable for one year from the date of
termination of service by reason of death or disability (or such shorter or
longer period as the Equity Award Committee decides). In the event of any other
termination of service, all options and stock appreciation rights held by the
participant that were not exercisable immediately prior to such termination of
service will terminate on that date (except as otherwise determined by the
Equity Award Committee). Any options or stock appreciation rights that were
exercisable will generally continue to be so for 6 months (or for such longer
period as the Equity Award Committee decides). Notwithstanding the
post-termination exercise periods described above, no option or stock
appreciation right may be exercised beyond its original term.
Except as otherwise determined by the Equity Award Committee, if a
participant who holds shares of restricted stock terminates his or her service
for any reason, including death or disability, prior to the lapse of the
restrictions, the participant must resell to the Company the shares of
restricted stock for the amount paid for such shares, or forfeit them to the
Company if no cash was paid. Further, except as otherwise decided by the Equity
Award Committee, rights under a performance award and dividend equivalent rights
to which a participant has not become irrevocably entitled and rights to the
payment of contract stock will terminate upon the participant's termination of
service with the Company for any reason (including death or disability). Payment
of any outstanding loan upon termination of service will depend on the terms of
the loan agreement.
14. ADJUSTMENTS IN SHARES; CERTAIN CORPORATE TRANSACTIONS. In the
event of a stock dividend, stock split, reverse split, or similar change in the
capitalization of the Company, the Equity Award Committee will make appropriate
adjustments to the maximum number of shares of Common Stock that may be
delivered under the Plan, the maximum number of Shares with respect to which
ISOs may be granted, the maximum number of Shares with respect to which other
options or stock appreciation rights may be granted, the exercise price of
outstanding awards, and the number of shares of Common Stock issuable upon
exercise or vesting of an award.
In the event of a "change in control" of the Company (as defined in
the Plan), all outstanding options and any stock appreciation rights will become
fully vested and exercisable, all awards of performance stock and dividend will
become fully vested, all rights to the payment of contract stock will become
immediately due and payable and all restrictions will be removed from any
outstanding shares of restricted stock.
In the event of a corporate transaction (as, for example, a merger,
consolidation, or acquisition of property or stock), each outstanding award will
be assumed by the surviving or successor entity. However, in the event of a
proposed corporate transaction, the Equity Award Committee may terminate all or
a portion of any outstanding award if it determines that doing so is in the best
interests of the Company. If so, the Equity Award Committee will give each
participant holding an option or a stock appreciation right not less than seven
days' notice prior to the termination, and any option or stock appreciation
right that is to be so terminated may be exercised (to the extent it is then
exercisable) before
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the termination. Further, in the event of a corporate transaction, the Equity
Award Committee, in its discretion, may (i) accelerate the date on which options
and stock appreciation rights become exercisable, (ii) remove restrictions from
the outstanding shares of restricted stock, (iii) cause the delivery of any
performance stock, even if the associated performance goals have not been met,
(iv) cause the payment of any dividend equivalent rights, (v) cause the delivery
of contract stock, even if the contract date has not yet passed and/or (vi)
forgive all or any portion of a loan. In lieu of the action described above, the
Equity Award Committee may arrange to have the surviving or acquiring entity
grant the participant a replacement award substantially equivalent to the
participant's existing award.
15. WITHHOLDING REQUIREMENTS. The grant or exercise of awards may
be subject to tax withholding requirements. Where shares of Common Stock may be
delivered under an award, the Equity Award Committee may require that the
participant either remit to the Company an amount necessary to satisfy the
withholding requirements or make other satisfactory arrangements (including, if
the Equity Award Committee so permits, the holding back of Shares from payments
under the award).
16. DISCONTINUANCE, CANCELLATIONS, AMENDMENT, AND TERMINATION. The
Equity Award Committee may at any time discontinue granting awards under the
Plan. The Board may at any time amend the Plan (and the Equity Award Committee
may amend any outstanding award, other than lowering the exercise price of
options or the purchase price of restricted stock) for any purpose, or may at
any time terminate the Plan, except that the following amendments may not be
made without the approval of the stockholders of the Company: (i) an increase in
the maximum number of shares of Common Stock with respect to which ISOs may be
granted under the Plan, (ii) a change in the class of employees eligible to
receive ISOs under the Plan, (iii) an extension of the duration of the Plan with
respect to ISOs, and (iv) any amendment to the Plan requiring stockholder
approval for purposes of the $1 million deduction limit on compensation under
Section 162(m) of the Code. Further, no amendment or termination of the Plan may
adversely affect the rights of any participant (without the participant's
consent) under any award previously granted.
17. FEDERAL INCOME TAX ASPECTS OF OPTIONS UNDER THE PLAN. Based on
the advice of counsel, the Company believes that, under current Federal income
tax laws and regulations, the principal Federal income tax consequences to the
Company and to the Eligible Individuals receiving ISOs and NQSOs ("Optionees")
pursuant to the Plan will be as follows. The consequences described below do not
take into account any changes to the Code or the regulations thereunder that may
occur after April 16, 2001. Nor does the following describe alternative minimum
tax, other Federal taxes, or foreign, state or local income taxes which may vary
depending on individual circumstances and from locality to locality.
If an option qualifies for ISO treatment, the Optionee will
recognize no income upon grant or exercise of the option except that the excess
at the time of exercise of the then fair market value of the Common Stock over
the exercise price will be an item of tax preference for purposes of the
alternative minimum tax. If the Optionee holds the shares for more than two
years after grant of the option and more than one year after exercise of the
option , upon an Optionee's sale of his or her shares of Common Stock, any gain
will be taxed to the Optionee as long-term capital gain. If the Optionee
disposes of his or her shares of Common Stock prior to the expiration of the
above holding period, the Optionee generally will recognize ordinary income in
an amount measured as the difference between the exercise price and the lower of
the fair market value of the Common Stock at the exercise date or the sale price
of the Common Stock. Any gain recognized on such a disposition of the Common
Stock in excess of the amount treated as ordinary income will be characterized
as capital gain. The Company will be allowed a business expense deduction to the
extent the Optionee recognizes ordinary income, subject to Sections 162(m) and
280G of the Code.
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An Optionee will not recognize any taxable income at the time the
Optionee is granted an NQSO. However, upon exercise of the option, the Optionee
will recognize ordinary income for Federal income tax purposes in an amount
generally measured as the excess of the then fair market value of the Common
Stock over the exercise price, and the Company will be entitled to a
corresponding deduction at the time of exercise, subject to Sections 83, 162(m)
and 280G of the Code. Upon an Optionee's sale of such shares, any difference
between the sale price and fair market value of such shares on the date of
exercise will be treated as capital gain or loss and will qualify for long-term
capital gain or loss treatment if the Common Stock has been held for more than
12 months.
Under Code Section 162(m), in general, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and nonqualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds $1
million in any one taxable year. However, under Code Section 162(m), the
deduction limit does not apply to certain "performance-based" compensation
established by an independent compensation committee which conforms to certain
restrictive conditions stated under the Code and related regulations. The Plan
has been structured with the intent that Awards granted under the Plan may meet
the requirements for "performance-based" compensation under Code Section 162(m).
To the extent granted at a fair market value exercise price, options granted
under the Plan are intended to qualify as "performance-based" under Section
162(m) of the Code. Stock appreciation rights will also qualify as
"performance-based" under Section 162(m) of the Code, to the extent they relate
to the increase in the market value of the Shares from the date of grant. Other
Awards granted under the Plan may also qualify as "performance-based" under Code
Section 162(m) if they vest or are otherwise payable based solely upon the
Performance Criteria.
18. REGISTRATION STATEMENT ON FORM S-8. If the Plan is approved by
the stockholders of the Company, the Company intends to file with the Commission
a Registration Statement on Form S-8 relating to the Plan to register the
issuance and sale by the Company of the shares of Common Stock that may be
issued pursuant to the Plan.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE 2001 EQUITY
INCENTIVE PLAN AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE "FOR" THE APPROVAL OF THE 2001 EQUITY INCENTIVE PLAN.
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PROPOSAL 3. RATIFICATION OF FEBRUARY 16, 2000 AMENDMENT
TO THE CERTIFICATE OF DESIGNATION, RIGHTS AND PREFERENCES
OF THE COMPANY'S SERIES B PREFERRED STOCK
GENERAL. The Board of Directors proposes and recommends that the
stockholders ratify and approve all actions taken by the Board of Directors in
connection with an amendment to the Certificate of Designation, Rights and
Preferences of the Company's Series B Preferred Stock (the "First Series B
Amendment") described below. The purpose of the proposal is to ratify the
Company's filing of the First Series B Amendment with Secretary of State of the
State of Delaware (the "Secretary of State") without obtaining prior stockholder
approval. The stockholders' approval of this proposal will relate back to, and
be deemed to be effective as of, March 21, 2000, the date of such filing.
EFFECT OF STOCKHOLDER RATIFICATION. The Company's Amended and
Restated Certificate of Incorporation gives the Board of Directors the authority
to provide by a resolution filed with the Secretary of State for the issuance of
shares of preferred stock in series, to establish the number of shares to be
included in each such series and to fix the designation, preferences and rights
of the shares of each such series as well as the qualifications, limitations and
restrictions of each such series. The Board of Directors exercised this
authority on February 25, 1999 by approving the Certificate of Designation,
Preferences and Rights of Series B Convertible Preferred Stock of the Company
(the "Original Series B Certificate"). The Company filed the Original Series B
Certificate with the Secretary of State on March 12, 1999.
The First Series B Amendment was adopted and approved by the Board
of Directors at a meeting held on February 16, 2000, and the Company filed the
First Series B Amendment with the Secretary of State on March 21, 2000. The
Company did not, however, seek or obtain stockholder approval of the First
Series B Amendment. As such, and absent the stockholder ratification
contemplated by this Proposal, the Company believes that the First Series B
Amendment may not have been effective under the Delaware Corporation Law and,
accordingly, that the rights and preferences of the Series B Preferred Stock may
continue to be governed only by the Original Series B Certificate. Due to the
minor nature of the revisions made by the First Series B Amendment, the Company
believes that the failure of the First Series B Amendment to be validly adopted
as described above would have no material effect on the rights and preferences
of any of the Company's outstanding shares of Common Stock or Preferred Stock.
SUMMARY OF FIRST SERIES B AMENDMENT. The text of the First Series B
Amendment is attached as APPENDIX B to this Proxy Statement. In addition, the
Company filed the First Series B Amendment as Exhibit 4.2 to the Company's
Current Report on Form 8-K filed with the Commission on April 10, 2000. The
following description of the First Series B Amendment is intended merely as a
summary of its principal features and is qualified in its entirety by reference
to the First Series B Amendment itself.
The Board of Directors adopted the First Series B Amendment to
ensure that the rights and preferences of the Series B Preferred Stock would be
substantially identical to, and in conformity with, the rights and preferences
of the Series C Preferred Stock. The Certificate of Designation, Preferences and
Rights of Series C Convertible Preferred Stock of the Company (the "Series C
Certificate") was filed with the Secretary of State on March 21, 2000, the same
date that the Company filed the First Series B Amendment.
The First Series B Amendment changed paragraphs 3, 4 and 9 of the
Company's Original Series B Certificate, which govern the rights and obligations
of the holders of Series B Preferred Stock in connection with dividends,
distribution of assets on liquidation and the optional redemption of the Series
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B Preferred Stock by the Company. All of the changes effected by the First
Series B Amendment and summarized below were intended to conform the provisions
of the Series B Preferred Stock to the terms of the Company's Series C Preferred
Stock. The effects of the changes were as follows:
o DIVIDENDS. Prior to the First Series B Amendment, the holders
of Series B Preferred Stock were entitled to receive, out of funds legally
available for such purpose, annual cumulative dividends that accrue at the rate
of 10% per year, payable upon the liquidation, dissolution or winding up of the
Company (a "Liquidation"). Holders of Series B Preferred Stock had no right to
receive dividends paid to holders of the Company's Common Stock. After giving
effect to the First Series B Amendment, if the Company declares a dividend or
makes any other distribution to the holders of the Common Stock, each holder of
a share of Series B Preferred Stock will be entitled to receive, out of funds
legally available for such purpose, a dividend or distribution in an amount
equal to the amount such holder would have received if such share of Series B
Preferred Stock had been converted into Common Stock on the record date for such
dividend or distribution. The Company has never declared, and does not presently
intend to declare, a dividend or distribution to the holders of the Common
Stock.
o DISTRIBUTIONS OF ASSETS ON LIQUIDATION. Prior to the First
Series B Amendment, upon a Liquidation, the holders of Series B Preferred Stock
were entitled to receive an amount equal to $100 per share plus, with respect to
such share, all accrued but unpaid dividends thereon (collectively, the
"Redemption Payment") before any distribution was made to the holders of any
stock ranking junior to the Series B Preferred Stock. After giving effect to the
First Series B Amendment, the holders of Series B Preferred Stock are entitled
to receive the greater of (1) the Redemption Payment and (2) the amount the
holders of the Series B Preferred Stock would receive if they were to convert
each share of Series B Preferred Stock into Common Stock immediately prior to
the Liquidation. The First Series B Amendment also deleted a clause in the
Original Series B Certificate which provided that the Redemption Payment was the
maximum amount to which the holders of Series B Preferred Stock were entitled.
o OPTIONAL REDEMPTION. The First Series B Amendment did not
materially change the rights and obligations of the Company with respect to the
optional redemption of the Series B Preferred Stock. The principal effect of the
amendment was to clarify that the redemption price for the redemption of the
Series B Preferred Stock would be a cash amount per share equal to the
Redemption Payment.
THE BOARD OF DIRECTORS HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE RATIFICATION OF THE FIRST SERIES B AMENDMENT.
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PROPOSAL 4. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES OF THE COMPANY'S
SERIES B PREFERRED STOCK
The Board of Directors proposes and recommends that the stockholders
approve the proposed amendment (the "Second Series B Amendment") to the
Certificate of Designation, Rights and Preferences of the Company's Series B
Preferred Stock, as amended, (the "Series B Certificate") described below. The
Second Series B Amendment was approved by the Board of Directors as of March 6,
2001, subject to approval by the stockholders at the Annual Meeting.
If adopted, the Second Series B Amendment would become part of the
Series B Certificate and would govern the designations, rights and preferences
of the Series B Preferred Stock. If the Second Series B Amendment is approved by
the stockholders, it will become effective upon filing of a Certificate of
Amendment to the Series B Certificate as required by the Delaware Corporation
Law. Note that the resolution authorizing the proposed Second Series B Amendment
provides that, at any time prior to the effectiveness of the filing of a
Certificate of Amendment to the Series B Certificate as required by Delaware
Corporation Law, the Board of Directors may abandon the proposed amendment
without further action of the stockholders, notwithstanding the prior
authorization of the proposed amendment by the stockholders.
PROPOSED SECOND SERIES B AMENDMENT. The sole purpose of the Second
Series B Amendment is to make certain non-material changes to clarify the
numbering of certain paragraphs and internal references contained therein. The
Second Series B Amendment would not make any substantive changes to the rights
or preferences of the Series B Preferred Stock. The text of the Second Series B
Amendment is attached as APPENDIX C to this Proxy Statement.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE SECOND
SERIES B AMENDMENT AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" APPROVAL OF THE SECOND SERIES B AMENDMENT.
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PROPOSAL 5. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES OF THE COMPANY'S
SERIES C PREFERRED STOCK
The Board of Directors proposes and recommends that the stockholders
approve the proposed amendment (the "Series C Amendment") to the Certificate of
Designation, Rights and Preferences of the Company's Series C Preferred Stock,
as amended, (the "Series C Certificate") described below. The Series C Amendment
was approved by the Board of Directors as of March 6, 2001, subject to approval
by the stockholders at the Annual Meeting.
If adopted, the Series C Amendment would become part of the Series C
Certificate and would govern the designations, rights and preferences of the
Series C Preferred Stock. If the Series C Amendment is approved by the
stockholders, it will become effective upon filing of a Certificate of Amendment
to the Series C Certificate as required by the Delaware Corporation Law. Note
that the resolution authorizing the proposed Series C Amendment provides that,
at any time prior to the effectiveness of the filing of a Certificate of
Amendment to the Series C Certificate as required by Delaware Corporation Law,
the Board of Directors may abandon the proposed amendment without further action
of the stockholders, notwithstanding the prior authorization of the proposed
amendment by the stockholders.
PROPOSED SERIES C AMENDMENT. The sole purpose of the Series C
Amendment is to make certain non-material changes to clarify the numbering of
certain paragraphs and internal references contained therein. The Series C
Amendment would not make any substantive changes to the rights or preferences of
the Series C Preferred Stock. The text of the Series C Amendment is attached as
APPENDIX C to this Proxy Statement.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE SERIES C
AMENDMENT AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
"FOR" APPROVAL OF THE SERIES C AMENDMENT.
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PROPOSAL 6. RATIFICATION OF AUDITORS
The firm of PricewaterhouseCoopers LLP served as the Company's
independent accountants for 2000 and has been selected by the Board of Directors
to serve in the same capacity for 2001. The stockholders will be asked to ratify
this appointment at the Meeting. The ratification of independent accountants by
the stockholders is not required by law or the Company's By-laws. Traditionally,
the Company has submitted this matter to the stockholders and believes that it
is good practice to continue to do so.
Ratification of PricewaterhouseCoopers LLP as the Company's auditors
requires the affirmative vote of the holders of at least a majority of the
issued and outstanding shares of Common Stock and Preferred Stock present, in
person or by proxy, at the Meeting and entitled to vote. If a majority of the
votes cast on this matter are not cast in favor of the ratification of
PricewaterhouseCoopers LLP, the Company will appoint other independent
accountants as soon as practicable and before the close of the 2001 year.
During fiscal year 2000, PricewaterhouseCoopers LLP not only acted
as the independent auditors for the Company, but also rendered on their behalf
other services, including tax and acquisition related due diligence services.
The following sets forth the aggregate fees billed or expected to be billed by
PricewaterhouseCoopers LLP to the Company:
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of the Company's annual financial
statements for the fiscal year ended December 31, 2000 and for the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-Q for that fiscal year were $268,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by PricewaterhouseCoopers LLP for
professional services rendered for information technology services relating to
financial information systems design and implementation for the fiscal year
ended December 31, 2000.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for
services rendered to the Company, other than the services described above under
"Audit Fees" and "Financial Information Systems Design and Implementation Fees",
for the fiscal year ended December 31, 2000 were $325,500. These fees included
tax and acquisition related due diligence services. The Audit Committee of the
Board of Directors considered the services listed above to be compatible with
maintaining PricewaterhouseCoopers LLP's independence.
A representative of PricewaterhouseCoopers LLP is expected to be
present at the Annual Meeting and will be available to respond to appropriate
questions. The representative will also have the opportunity to make a statement
if he or she desires to do so.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE
APPOINTMENT OF AUDITORS AND HEREBY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S AUDITORS FOR 2001.
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ADDITIONAL INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors and executive officers,
as well as persons beneficially owning more than 10% of the Company's
outstanding shares of Common Stock and certain other holders of such shares
(collectively, "Covered Persons"), to file with the Commission and the Nasdaq
Stock Market, within specified time periods, initial reports of ownership, and
subsequent reports of changes in ownership, of Common Stock and other equity
securities of the Company.
Based solely upon the Company's review of copies of such reports
furnished to it and upon representations of Covered Persons that no other
reports were required, to the Company's knowledge all of the Section 16(a)
filing requirements applicable to Covered Persons were complied with during
2000, except that a statement of changes in beneficial ownership of securities
on Form 4 was filed late by George F. McHugh, Senior Vice President, for the
purchase and sale of Common Stock in June 2000 and the sale of Common Stock in
December 2000.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the
Board of Directors. The only family relationship between any of the executive
officers and directors of the Company is that Mr. Holtz is the nephew of Richard
E. Caruso, Ph.D., who is Chairman of the Company's Board of Directors. The
following information indicates the position and age of the Company's executive
officers as of the date of this proxy statement and their previous business
experience.
NAME AGE POSITION
---- --- --------
Stuart M. Essig, Ph.D. ........... 39 President, Chief Executive Officer
and Director
George W. McKinney, III, Ph.D. ... 57 Executive Vice President, Chief
Operating Officer, Director
John B. Henneman, III ............ 39 Senior Vice President, Chief
Administrative Officer and Secretary
Judith E. O'Grady ................ 50 Senior Vice President, Regulatory,
Quality Assurance and Clinical Affairs
Michael D. Pierschbacher, Ph.D. .. 49 Senior Vice President Research and
Development, General Manager, Corporate
Research Center
David B. Holtz ................... 34 Senior Vice President, Finance and
Treasurer
STUART M. ESSIG, PH.D. - see information previously provided above
under "Proposal 1. Election of Directors".
GEORGE W. MCKINNEY, III, PH.D. - see information previously provided
above under "Proposal 1. Election of Directors".
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JOHN B. HENNEMAN, III is Integra's Senior Vice President, Chief
Administrative Officer and Secretary, and is responsible for the law department,
business development, human resources and investor relations. Mr. Henneman was
the Company's General Counsel from September 1998 until September 2000. Prior to
joining Integra in August 1998, Mr. Henneman served Neuromedical Systems, Inc.,
a public company developer and manufacturer of in vitro diagnostic equipment, in
various capacities for more than four years. From 1994 until June 1997, Mr.
Henneman was Vice President of Corporate Development, General Counsel and
Secretary. From June 1997 through November 1997, he served in the additional
capacity of interim Co-Chief Executive Officer and from December 1997 to August
1998 Mr. Henneman was Executive Vice President, US Operations, and Chief Legal
Officer. In March 1999, Neuromedical Systems, Inc. filed a petition under
Chapter 11 of the federal bankruptcy laws. Mr. Henneman practiced law in the
Corporate Department of Latham & Watkins (Chicago, Illinois) from 1986 to 1994.
Mr. Henneman received his A.B. (Politics) from Princeton University in 1983, and
his J.D. from the University of Michigan Law School in 1986.
JUDITH E. O'GRADY, Senior Vice President of Regulatory Affairs,
Quality Assurance and Clinical Research, has served Integra since 1985. Ms.
O'Grady has worked in the areas of medical devices and collagen technology for
over 20 years. Prior to joining Integra, Ms. O'Grady worked for Colla-Tec, Inc.,
a Marion Merrell Dow Company. During her career she has held positions with
Surgikos, a Johnson & Johnson company, and was on the faculty of Boston
University College of Nursing and Medical School. Ms. O'Grady led the team that
obtained the FDA approval for INTEGRA(R)Dermal Regeneration Template, the first
regenerative product approved by the FDA, and has led teams responsible for more
than 100 510(K) clearances. She received her BS degree from Marquette University
and MSN in Nursing from Boston University.
MICHAEL D. PIERSCHBACHER, PH.D. joined Integra in October 1995 as
Senior Vice President, Research and Development. In May 1998 he was named Senior
Vice President and Director of the Corporate Research Center. From June 1987 to
September 1995, Dr. Pierschbacher served as Senior Vice President and Scientific
Director of Telios Pharmaceuticals, Inc., ("Telios") which was acquired by us in
connection with the reorganization of Telios under Chapter 11 of the federal
bankruptcy code. He was a co-founder of Telios in May 1987 and is the
co-discoverer and developer of Telios' matrix peptide technology. Before joining
Telios as a full-time employee in October 1988, he was a staff scientist at the
Burnham Institute for five years and remained on staff there in an adjunct
capacity until the end of 1997. He received his post-doctoral training at
Scripps Clinical and Research Foundation and at the Burnham Institute. Dr.
Pierschbacher received his Ph.D. in Biochemistry from the University of
Missouri.
DAVID B. HOLTZ joined Integra as Controller in 1993 and has served
as Vice President, Finance and Treasurer since March 1997 and was promoted to
Senior Vice President, Finance and Treasurer in February 2001. His
responsibilities include managing all accounting and information systems
functions. Before joining Integra, Mr. Holtz was an associate with Coopers &
Lybrand, L.L.P. in Philadelphia and Cono Leasing Corporation, a private leasing
company. He received a BS degree in Business Administration from Susquehanna
University in 1989 and has been certified as a public accountant.
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EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's
last three fiscal years concerning the annual, long-term and other compensation
of the chief executive officer of the Company and each of the Company's four
highest paid executive officers as of December 31, 2000 whose total annual
salary and bonus during 2000 exceeded $100,000 (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE

(1) Other than certain moving expenses reimbursed to Mr. Essig and Dr.
McKinney, the amounts reported in this column consist of the Company's
matching contributions to the Company's 401(k) Plan. The amounts reported
in this column for Mr. Essig during 2000 include $48,596 for moving
expenses reimbursed by the Company. The amounts reported in this column
for Dr. McKinney during 1998 include $34,301 for moving expenses
reimbursed by the Company.
(2) The terms of Mr. Essig's Restricted Units are described herein under the
heading "Employment Agreements." As of December 31, 2000, Mr. Essig held
Restricted Units which entitled him to receive an aggregate of 2,250,000
shares of Common Stock. Based on the closing price of the Company's Common
Stock on December 29, 2000 of $13.625 per share, Mr. Essig's Restricted
Units had an aggregate value of $30,656,250 as of December 31, 2000.
(3) Mr. Henneman joined the Company in September 1998.
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The following tables set forth certain information concerning stock
options granted to Named Officers during 2000 and the unexercised options held
by them at December 31, 2000.
OPTION GRANTS IN LAST FISCAL YEAR

(1) Such options were granted at a price at or above fair market value, are
nontransferable and vest over a period of four years commencing with the
date of grant.
(2) The Company granted options to employees to purchase an aggregate of
1,498,130 shares of Common Stock during 2000.
(3) The terms of Mr. Essig's option grant to purchase 500,000 shares are
described herein under the heading "Employment Agreements"
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) In-the-money options are those in which the fair market value of the
underlying securities exceeds the exercise price of the option. The
closing price of the Company's Common Stock on December 29, 2000 was
$13.625 per share. Value is calculated on the basis of the fair market
value of the underlying securities on December 31, 2000 minus the exercise
price.
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EMPLOYMENT AGREEMENTS
STUART M. ESSIG, Integra's current President and Chief Executive
Officer, entered into an Amended and Restated Employment Agreement with the
Company in December 2000 that extended the term of his employment with the
Company as its President and Chief Executive Officer through December 31, 2005.
The Amended Employment Agreement supersedes Mr. Essig's prior employment
agreement with the Company dated December 1997.
Under the Amended Employment Agreement, the Company will pay Mr.
Essig an annual base salary of $325,000 for 2001 and $400,000 for 2002. For each
subsequent year that he is employed, Mr. Essig's annual base salary will be
$400,000 plus such increases, if any, as may be established by the Company's
Board of Directors. Mr. Essig is also eligible to receive a performance bonus of
up to fifty percent (50%) of his base salary, based upon the satisfaction of
certain performance goals established by the Company's Board of Directors. Mr.
Essig is also entitled to life insurance equal to the lesser of (a) a $3,000,000
four-year minimum renewable term life insurance policy and (b) the four-year
minimum renewable term life policy purchasable by the Company by paying premium
payments of $5,000 per year for such policy. At the request of Mr. Essig, the
Company will disburse a loan to Mr. Essig in the amount of up to $500,000
subject to certain conditions. Mr. Essig is also entitled to participate in the
Company's medical, disability, pension and other employee benefit plans and
programs maintained from time to time by the Company for the benefit of its
senior executives. The Amended Employment Agreement is for an initial term
through December 31, 2005 and shall automatically extend on December 31, 2005
and on each subsequent one-year anniversary thereof for one year unless the
Company or Mr. Essig provides written notice of termination at least six months
prior to the expiration of the then-current term.
The Amended Employment Agreement further provides that the Company
generally will reimburse, or "gross-up," Mr. Essig on an after-tax basis for any
excise tax liability he may incur by reason of any "excess parachute payments"
he receives from the Company. Section 280G of the Internal Revenue Code of 1986,
as amended, provides that if payments of compensation that are contingent on a
change in control exceed three times an employee's "base amount" (his average
annual compensation during certain prior years), they will constitute "parachute
payments," and the excess of such parachute payments over such base amount
generally will constitute "excess parachute payments." Such excess parachute
payments are nondeductible by the employer and are subject to a 20% excise tax
payable by the employee.
In connection with the extension of the term of Mr. Essig's
employment pursuant to the Amended Employment Agreement, the Company granted Mr.
Essig (i) a non-qualified stock option to purchase 250,000 shares of the
Company's common stock under Integra's 1999 Stock Option Plan, (ii) a
non-qualified stock option to purchase 250,000 shares of the Company's common
stock under Integra's 2000 Equity Incentive Plan and (iii) 1,250,000 "Restricted
Units" under Integra's 2000 Equity Incentive Plan. Each stock option (each, an
"Option") expires on December 21, 2010 and has an exercise price equal to $11.00
per share (the closing price of the Company's common stock on The Nasdaq
National Market on December 21, 2000). Assuming the continuation of Mr. Essig's
employment with the Company, each Option will vest and become exercisable with
respect to 62,500 shares on December 22, 2002 and thereafter with respect to
1/36th of the remaining shares on the first business day of each following
month. In the event of a (i) "change in control" of the Company (as defined in
the Amended Employment Agreement) or (ii) the termination of Mr. Essig's
employment with the Company (a) by Integra without "cause" (as defined in the
Amended Employment Agreement) or (b) by Mr. Essig for "good reasons" (as defined
in the Amended Employment Agreement), the Options shall vest and become
exercisable immediately. The Option granted pursuant to Integra's 1999 Stock
Option Plan may be
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transferred by Mr. Essig to members of his immediate family, to trusts
established for the benefit of his immediate family or to partnerships or
limited liability companies of which the partners or members are members of his
immediate family. Otherwise, the Options may not be transferred by Mr. Essig
other than by will or by the laws of descent and distribution.
Under a Restricted Units Agreement, the Company issued to Mr. Essig
a fully vested equity-based signing award bonus in the form of 1,250,000
restricted units (the "Restricted Units"). Each Restricted Unit represents the
right to receive one share of the Company's common stock. The shares of the
Company's common stock underlying the Restricted Units ("Unit Shares") shall be
delivered to Mr. Essig on January 1, 2006 if Mr. Essig is employed by the
Company on December 31, 2005 or on such earlier date as a change in control of
the Company occurs; provided, however, that Mr. Essig has the right to defer the
delivery of the Unit Shares on as many occasions as Mr. Essig determines from
time to time through, but not beyond, June 30, 2025. The Unit Shares may be
delivered to Mr. Essig prior to January 1, 2006 in the event of a termination of
Mr. Essig's employment with the Company other than (a) for cause or (b) due to
his voluntary departure (other than for good reasons or due to disability). If,
prior to December 31, 2005 and prior to a change of control of the Company, (i)
Mr. Essig's employment with Integra is terminated for cause or (ii) Mr. Essig
voluntarily leaves his employment with the Company (other than for good reasons
or due to disability), the Unit Shares will be distributed to Mr. Essig on
January 1, 2010.
The Company has also granted Mr. Essig registration rights requiring
the Company to file a "shelf" registration statement at Mr. Essig's request that
will provide for the registration and sale on a continuous or delayed basis of
the shares of Integra common stock underlying the Options and the Restricted
Units.
GEORGE W. MCKINNEY, III, PH.D., entered into an employment agreement
with the Company in December 1998 to serve as the Company's Executive Vice
President and Chief Operating Officer. Dr. McKinney was entitled under that
agreement to participate and receive benefits under any employee benefit plan or
stock-based plan of the Company and was eligible for any medical, disability and
other plans and benefits covering executives of the Company. The employment
agreement provided for an initial term expiring on December 31, 2001.
On February 22, 2001 the Company and Dr. McKinney entered into a new
employment agreement that superseded his existing employment agreement. The new
employment agreement provides that Dr. McKinney will continue to serve as
Executive Vice President and Chief Operating Officer until December 31, 2001 at
a salary at the rate of $270,000 per year, at which point he will retire from
such position. Thereafter, until June 30, 2002, Dr. McKinney will remain
employed by the Company as consultant to the President and CEO at the same rate
of salary. On July 12, 2002, Dr. McKinney will receive a lump sum payment, net
of applicable taxes and other withheld items, equal to six months of salary at
the same rate. Dr. McKinney is generally eligible for medical, disability and
other plans and benefits covering executives of the Company under the new
employment agreement.
MICHAEL D. PIERSCHBACHER, PH.D. entered into an employment agreement
with the Company in December 1998 to serve as the Company's Senior Vice
President, Research and Development and General Manager, Corporate Research
Center. The employment agreement provides for an annual salary of $240,000. Dr.
Pierschbacher is entitled to participate and receive benefits under any employee
benefit plan or stock-based plan of the Company and shall be eligible for any
medical, disability and other plans and benefits covering executives of the
Company. The employment agreement had an initial term through December 31, 2000
and was automatically extended on December 31, 2000 through December 31, 2001.
The employment agreement will automatically extend on December 31, 2001 and on
each one-year anniversary thereof for one year unless the Company or Dr.
Pierschbacher provides written notice at least 30 days prior to the expiration
of the then-current term. In the event the employment agreement is earlier
terminated by Dr. Pierschbacher
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for good reason or by the Company for reasons other than cause, retirement,
disability or death, in each case within six months of a change in control of
the Company, Dr. Pierschbacher shall be entitled to receive a severance amount
equal to 2.99 times his then-current annual base salary. In the event the
employment agreement is earlier terminated as aforesaid without a change in
control, Dr. Pierschbacher shall be entitled to receive a severance amount equal
to the greater of his then-current annual base salary or the unpaid portion of
Dr. Pierschbacher's base salary for the remainder of the then-current term.
JOHN B. HENNEMAN, III entered into an employment agreement with the
Company in September 1998 to serve as the Company's Senior Vice President, Chief
Administrative Officer and General Counsel. Effective with the hiring of a new
General Counsel for the Company in September 2000, Mr. Henneman no longer serves
as the Company's General Counsel. The employment agreement provides for an
annual salary of $240,000. Mr. Henneman is entitled to participate and receive
benefits under any employee benefit plan or stock-based plan of the Company and
shall be eligible for any medical, disability and other plans and benefits
covering executives of the Company. The employment agreement had an initial term
through December 31, 2000 and was automatically extended on December 31, 2000
through December 31, 2001. The employment agreement will automatically extend on
December 31, 2001 and on each one-year anniversary thereof for one year unless
the Company or Mr. Henneman provides written notice at least 30 days prior to
the expiration of the then-current term. In the event the employment agreement
is earlier terminated by Mr. Henneman for good reason or by the Company for
reasons other than cause, retirement, disability or death, in each case within
six months of a change in control of the Company, Mr. Henneman shall be entitled
to receive a severance amount equal to 2.99 times his then-current annual base
salary. In the event the employment agreement is earlier terminated as aforesaid
without a change in control, Mr. Henneman shall be entitled to receive a
severance amount equal to the unpaid portion of Mr. Henneman's base salary for
the remainder of the then-current term, but in no event for a period of less
than one year.
JUDITH O'GRADY entered into an employment agreement with the Company
in December 1998 to serve as the Company's Senior Vice President for Regulatory,
Quality Assurance and Clinical Affairs. The employment agreement provides for an
annual salary of $175,000. Ms. O'Grady is entitled to participate and receive
benefits under any employee benefit plan or stock-based plan of the Company and
shall be eligible for any medical, disability and other plans and benefits
covering executives of the Company. The employment agreement had an initial term
through December 31, 2000 and was automatically extended on December 31, 2000
through December 31, 2001. The employment agreement will automatically extend on
December 31, 2001 and on each one-year anniversary thereof for one year unless
the Company or Ms. O'Grady provides written notice at least 30 days prior to the
expiration of the then-current term. In the event the employment agreement is
earlier terminated by Ms. O'Grady for good reason or by the Company for reasons
other than cause, retirement, disability or death, in each case within six
months of a change in control of the Company, Ms. O'Grady shall be entitled to
receive a severance amount equal to 2.99 times her then-current annual base
salary. In the event the employment agreement is earlier terminated as aforesaid
without a change in control, Ms. O'Grady shall be entitled to receive a
severance amount equal to the greater of her then-current annual base salary or
the unpaid portion of Ms. O'Grady's base salary for the remainder of the
then-current term.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company leases its manufacturing facility in Plainsboro, New
Jersey from Plainsboro Associates, a New Jersey general partnership. Ocirne,
Inc., a subsidiary of Cono Industries ("Cono"), owns a 50% interest in
Plainsboro Associates. Cono is a corporation whose stockholders are trusts whose
beneficiaries include the children of Dr. Caruso, the Chairman and a principal
stockholder of the Company. Dr. Caruso is the President of Cono. The Company
paid $209,848 in rent for this facility during 2000.
During 2000, the Company signed a five year lease related to certain
production equipment, from Medicus Corporation. The sole stockholder of Medicus
is Trust Partnership, a Pennsylvania general partnership, for which Dr. Caruso
is a partner and the President. Under the terms of the lease, the Company paid
$45,000 to Medicus Corporation during 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee is required by
the rules of the Commission to be included in this Proxy Statement and addresses
the Company's executive compensation policies for the year ended December 31,
2000. This report shall not be deemed incorporated by reference into any filing
under the Securities Act, or the Exchange Act, by virtue of any general
statement in such filing incorporating this Proxy Statement by reference, except
to the extent that the Company specifically incorporates the information
contained in this section by reference, and shall not otherwise be deemed filed
under either the Securities Act or the Exchange Act.
GENERAL. The Company's compensation policies for executives are
intended to further the interests of the Company and its stockholders by
encouraging growth of its business through securing, retaining and motivating
management employees of high caliber who possess the skills necessary to the
development and growth of the Company. The Compensation Committee is mindful of
the need to align the interests of management with the interests of the
Company's stockholders. The establishment of the Company's equity-based plans
was designed to permit the Company to attract and retain talented managers and
motivate such managers to enhance profitability and stockholder returns. The
Committee believes that the utilization of equity-based plans serves the
interests of the stockholders, especially by permitting the Company to preserve
cash for other operational purposes.
The Company's compensation package consists of four major
components: base compensation; performance bonuses; deferred compensation; and
stock options (and, where appropriate, restricted equity grants). Together these
elements comprise total compensation value. The total compensation paid to the
Company's executive officers is influenced significantly by the need to attract
management employees with a high level of expertise and to motivate and retain
key executives for the long-term success of the Company and its stockholders.
BASE COMPENSATION. The Committee establishes annual base salary
levels for executives based on competitive data, level of experience, position,
responsibility, and individual and Company performance. The Company has sought
to align base compensation levels comparable to its competitors.
PERFORMANCE BONUSES. The Company supplements base compensation with
awards of performance bonuses in the form of cash and stock options. In
establishing bonuses for the fiscal year ended December 31, 2000, the
Compensation Committee determined that it was not in the
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Company's best interests to have a cash bonus program for executives. Instead,
the Committee sought to reward the efforts and achievements of certain executive
officers during this period by granting additional options to purchase up to an
aggregate of 120,000 shares of the Company's Common Stock.
STOCK OPTIONS. The Company has granted stock options to its
executive management under its stock option plans. Option grants are intended to
bring the total compensation to a level that the Company believes is competitive
with amounts paid by the Company's competitors and which will offer significant
returns if the Company is successful and, therefore, provides significant
incentives to devote the effort called for by the Company's strategy. The
Compensation Committee believes that executives' interests are directly tied to
enhanced stockholder value. Thus, stock options have been used to provide the
executive management team with a strong incentive to perform in a manner that
will benefit the long-term success of the Company and its stockholders.
DEFERRED COMPENSATION PLAN. The Company permits certain select
management and highly compensated employees to elect to defer up to 50 percent
of their base compensation. The Company believes that a non-qualified deferred
compensation plan enhances the ability of the Company to attract and retain
certain executive officers and motivate them to exercise their best efforts on
behalf of the Company and its stockholders. For fiscal year 2000, two employees
elected to defer a portion of their base compensation.
OTHER BENEFITS. The Company makes available health care benefits and
a 401(k) plan for executive officers on terms generally available to all Company
employees. The Committee believes that such benefits are comparable to those
offered by other companies of similar size. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed $50,000 or 10% of
the salary of any executive officer in the last fiscal year.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Essig served as the
Company's President and Chief Executive Officer during 2000 pursuant to an
employment agreement. Under Mr. Essig's employment agreement, the Company paid
Mr. Essig a base salary of $317,500 in 2000. Mr. Essig waived his right to
receive a performance bonus in 2000. Instead, the Company granted to Mr. Essig
options to purchase 20,000 shares of the Company's Common Stock. For a
numerical description of Mr. Essig's compensation in 2000, see "Executive
Compensation." The other terms and conditions of Mr. Essig's employment
agreement were substantially similar to the terms and conditions of Mr. Essig's
Amended and Restated Employment Agreement, which is described in the section
entitled "Employment Agreements." The Amended and Restated Employment Agreement
supersedes Mr. Essig's 2000 employment agreement.
In connection with the extension of Mr. Essig's employment pursuant
to the Amended and Restated Employment Agreement, the Company also granted Mr.
Essig (1) a non-qualified stock option to purchase 250,000 shares of the
Company's Common Stock under the Company's 1999 Stock Option Plan, (2) a
non-qualified stock option to purchase 250,000 shares of the Company's Common
Stock under the Company's 2000 Equity Incentive Plan and (3) 1,250,000
restricted units, each representing the right to receive one share of the
Company's Common Stock, under the Company's 2000 Equity Incentive Plan. For a
more detailed description of these awards, see the section entitled "Employment
Agreements." The Company believes that these awards are consistent with the
Company's above described compensation policies for executives because they
further align Mr. Essig's interests with the interests of the Company's
stockholders.
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Under Code Section 162(m), in general, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and nonqualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds $1
million in any one taxable year. However, compensation that qualifies as
"performance-based" is excluded from the $1 million limit if, among other
requirements the compensation is payable only upon attainment of pre-established
objective performance goals under a plan approved by stockholders.
The Compensation Committee does not presently expect total cash
compensation payable as salaries and bonuses to exceed the $1 million limit for
any individual executive. Having considered the requirements of Section 162(m),
the Compensation Committee believes that stock option grants to date meet the
requirements that such grants be "performance-based" and are, therefore, exempt
from the limitations on deductibility. The Compensation Committee will continue
to monitor the compensation levels potentially payable under its cash
compensation programs, but intends to maintain the flexibility necessary to
provide total cash compensation in line with competitive practices, the
Company's compensation philosophy and the Company's best interests.
The Compensation Committee of the Board of Directors
RICHARD E. CARUSO, PH.D.
KEITH BRADLEY, PH.D.
NEAL MOSZKOWSKI
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AUDIT COMMITTEE REPORT
The following report of the Audit Committee is required by the rules of
the Commission to be included in this Proxy Statement. This report shall not be
deemed incorporated by reference into any filing under the Securities Act, or
the Exchange Act, by virtue of any general statement in such filing
incorporating this Proxy Statement by reference, except to the extent that the
Company specifically incorporates the information contained in this section by
reference, and shall not otherwise be deemed filed under either the Securities
Act or the Exchange Act.
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Committee operates
pursuant to a Charter that was last amended and restated by the Board on March
30, 2001, a copy of which is attached to this Proxy Statement as APPENDIX D.
As set forth in the Charter, management of the Company is responsible for
the preparation, presentation and integrity of the Company's financial
statements, the Company's accounting and financial reporting principles and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for auditing the Company's financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee has considered
and discussed the audited financial statements with management and the
independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, COMMUNICATION WITH AUDIT COMMITTEES, as currently in effect. Finally,
the Committee has received the written disclosures and the letter from the
independent auditors required by independence Standards Board Standard No. 1,
"INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES". Management has represented to
the Committee that the Company's consolidated financial statements were prepared
in accordance with generally accepted accounting principles.
The members of the Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations.
Furthermore, the Committee's considerations and discussions referred to
above do not assure that the audit of the Company's financial statements has
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with generally accepted
accounting principles or that the Company's auditors are in fact "independent".
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Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in the Charter, the Committee recommended to the Board
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 to be filed with the
Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
JAMES M. SULLIVAN
KEITH BRADLEY
NEAL MOSZKOWSKI
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STOCK PERFORMANCE GRAPH
The following line graph and table compare, for the period from
December 29, 1995 through December 29, 2000, the yearly percentage change in the
cumulative total stockholder return on the Company's Common Stock with the
cumulative total return of companies on the Nasdaq Stock Market - U.S. Index and
the Nasdaq Medical Devices, Instruments and Supplies, Manufacturers and
Distributors Index. The graph assumes that the value of the investment in the
Company's Common Stock and the relevant index was $100 at December 29, 1995 and
that all dividends were reinvested. The closing market price of the Company's
Common Stock on December 29, 2000 was $13.625 per share.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
VALUE OF INVESTMENT OF $100 ON DECEMBER 29, 1995
[LINE CHART OMITTED]
Comparison of Cumulative Total Return
among Integra LifeSciences Holdings Corporation,
the Nasdaq Stock Market -- U.S. Index and the Nasdaq Medical Devices,
Instruments and Supplies, Manufacturers and Distributors Index
12/95 12/96 12/97 12/98 12/99 12/00
----- ----- ----- ----- ----- -----
Integra LifeSciences
Holdings Corporation $100 $ 71 $ 68 $ 26 $ 45 $105
Nasdaq Stock Market -
U.S. Index $100 $123 $151 $213 $395 $238
Nasdaq Medical Devices,
Instruments and Supplies,
Manufacturers and
Distributors Index $100 $ 94 $107 $120 $146 $151
The graph and table above depicts the past performance of the
Company's stock price. The Company neither makes nor endorses any predictions as
to future stock performance. The graph and table set forth above shall not be
deemed (i) incorporated by reference into any filing under the Securities Act or
the Exchange Act by virtue of any general statement in such filing incorporating
this Proxy Statement by reference, except to the extent that the Company
specifically incorporates the information contained in this section by
reference, and (ii) filed under either the Securities Act or the Exchange Act.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock and Preferred Stock as of March 30, 2001
by: (a) each person or entity known to the Company to own beneficially five
percent or more of the outstanding shares of Common Stock or Preferred Stock,
based upon Company records or Commission records; (b) each of the Company's
directors; (c) each of the Named Officers; and (d) all executive officers and
directors of the Company as a group. Each share of Series B Preferred Stock is
currently convertible at the discretion of the holder into 26.178 shares of
Common Stock and each share of Series C Preferred Stock is currently convertible
at the discretion of the holder into 11.111 shares of Common Stock, in each case
subject to certain adjustments. Except as otherwise indicated, each person has
sole voting power and sole investment power with respect to all shares
beneficially owned by such person.

* Represents beneficial ownership of less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days upon the exercise of
an option or other convertible security are treated as outstanding for
purposes of determining beneficial ownership and the percentage
beneficially owned by such individual.
(2) Includes the 7,179,205 shares held by Trust Partnership, a Pennsylvania
general partnership of which Dr. Caruso is a partner and the President
(also see Note 3 below). Also includes 23,338 shares held by Provco
Leasing Corporation ("Provco") of which Dr. Caruso is President. Provco is
a wholly-owned subsidiary of Cono Industries, a corporation whose
stockholders are trusts whose beneficiaries include Dr. Caruso's children.
Also includes 98,875 shares issuable upon exercise of the vested portion
of options held by Dr. Caruso. Dr. Caruso's address is 919 Conestoga Road,
Building 2, Suite 106, Rosemont, Pennsylvania 19010.
(3) The partners of Trust Partnership are Pagliacci Trust, Rigoletto Trust,
Trust for Jonathan Henry Caruso, Trust for Peter James Caruso (the
beneficiaries of all such trusts (the "Trusts") being Dr. Caruso's
children), Dr. Caruso and Provco, each of which may be deemed to
beneficially own the shares held by
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Trust Partnership; however, such partners of Trust Partnership disclaim
beneficial ownership of all such shares except to the extent represented
by their respective equity and profit participation interests in Trust
Partnership. The Trust Partnership's address is c/o Richard E. Caruso,
Ph.D., 919 Conestoga Road, Building 2, Suite 106, Rosemont, Pennsylvania
19010.
(4) Frances C. Holtz is a trustee of the Trusts, which collectively have a
controlling interest in Trust Partnership. As such, Ms. Holtz may be
deemed to beneficially own the shares held by Trust Partnership; however,
Ms. Holtz disclaims beneficial ownership of all such shares. Ms. Holtz's
address is 8111 Marshall Avenue, Margate, New Jersey 08402.
(5) Includes (i) 1,963,350 shares of Common Stock issuable upon conversion of
75,000 shares of Series B Preferred Stock held by Quantum Industrial
Partners LDC ("QIP"), (ii) 541,100 shares of Common Stock issuable upon
conversion of 48,699 shares of Series C Preferred Stock held by QIP; and
(iii) 270,550 shares of Common Stock issuable upon exercise of warrants
held by QIP. The principal address of QIP is at Kaya Flamboyan 9,
Willemsted, Curacao, Netherlands Antilles. QIH Management Investor, L.P.
("QIHMI") is vested (pursuant to constituent documents of QIP) with
investment discretion with respect to the portfolio assets held for the
account of QIP. Pursuant to an agreement between George Soros and Soros
Fund Management LLC ("SFM"), Mr. Soros has agreed to use his best efforts
to cause QIH Management, Inc., as the sole general partner of QIHMI, to
act at the discretion of SFM. Mr. Soros is the Chairman of SFM.
Accordingly, each of QIHMI, QIH Management, Inc., SFM and Mr. Soros may be
deemed the beneficial owner of the QIP Shares. Each has their principal
business office at 888 Seventh Avenue, 33rd Floor, New York, New York
10106.
(6) The address of Union Carbide Corporation is 39 Old Ridgebury Road,
Danbury, Connecticut 06817.
(7) The address of the State of Wisconsin Investment Board is 121 East Wilson
Street, Madison, Wisconsin 53702.
(8) Carnrick Laboratories, Inc. ("Carnrick") is a wholly-owned subsidiary of
Athena Neurosciences, Inc., which is a wholly-owned subsidiary of Elan
Corporation, plc, each of which may be deemed the beneficial owner of the
shares held by Carnrick. The address for each of the foregoing companies
is c/o Elan Corporation, plc, Lincoln House, Lincoln Place, Eighty Pine
Street, Dublin 2, Ireland.
(9) Includes (i) 654,450 shares of Common Stock issuable upon conversion of
25,000 shares of Series B Preferred Stock held by SFM Domestic Investments
LLC ("SFMDI"), (ii) 58,900 shares of Common Stock issuable upon conversion
of 5,301 shares of Series C Preferred Stock; and (iii) 29,450 shares of
Common Stock issuable upon exercise of warrants. The principal business
office of SFMDI is at 888 Seventh Avenue, 33rd Floor, New York, New York
10106. George Soros is a managing member of SFMDI and may be deemed the
beneficial owner of the SFMDI Shares.
(10) Includes 500,601 shares issuable upon exercise of the vested portion of
options held by Mr. Essig. Excludes Restricted Units awarded to Mr. Essig
in 1997 and 2000 which entitle him to receive an aggregate of 2,250,000
shares of Common Stock (see "Employment Agreements"). The Restricted Units
held by Mr. Essig do not give him the right to acquire any shares within
60 days of March 30, 2001.
(11) Includes 221,878 shares issuable upon exercise of the vested portion of
options held by Dr. McKinney.
(12) Includes 99,540 shares issuable upon exercise of the vested portion of
options held by Mr. Henneman.
(13) Includes 41,064 shares issuable upon exercise of the vested portion of
options held by Ms. O'Grady.
(14) Includes 1,678 shares held by a revocable trust of which Dr. Pierschbacher
is co-trustee. Also includes 37,337 shares issuable upon exercise of the
vested portion of options held by Dr. Pierschbacher.
(15) Includes 25,500 shares issuable upon exercise of the vested portion of
options held by Mr. Sullivan.
(16) Consists of 20,000 shares issuable upon exercise of the vested portion of
options held by Mr. Moszkowski.
(17) Includes 500 shares issuable upon exercise of the vested portion of
options held by Dr. Bradley.
(18) See Notes 2 and 10 through 17 above. Also includes 7,046 shares, as well
as 39,228 shares issuable upon exercise of the vested portion of options,
held by one executive officer of the Company and/or its subsidiaries who
is not listed in the table.
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STOCKHOLDER PROPOSALS
The deadline for stockholders to submit proposals pursuant to Rule
14a-8 of the Exchange Act for inclusion in the Company's proxy statement and
form of proxy for the 2002 Annual Meeting of Stockholders (the "Annual Meeting")
is December 15, 2001. The date after which notice of a stockholder Proposal
submitted outside of the processes of Rule 14a-8 of the Exchange Act is
considered untimely is February 28, 2002. If notice of a stockholder Proposal
submitted outside of the processes of Rule 14a-8 of the Exchange Act is received
by the Company after February 28, 2002, then the Company's proxy for the Annual
Meeting may confer discretionary authority to vote on such matter without any
discussion of such matter in the proxy statement for the Annual Meeting.
OTHER MATTERS
A copy of the Company's 2000 Annual Report to Stockholders is being
mailed simultaneously herewith to stockholders but is not to be regarded as
proxy solicitation material.
THE COMPANY, UPON REQUEST, WILL FURNISH TO RECORD AND BENEFICIAL
HOLDERS OF ITS COMMON STOCK, FREE OF CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS) FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2000. COPIES OF EXHIBITS TO THE FORM 10-K ALSO
WILL BE FURNISHED UPON REQUEST AND THE PAYMENT OF A REASONABLE FEE. ALL REQUESTS
SHOULD BE DIRECTED TO JOHN BOSTJANCIC, DIRECTOR OF FINANCE, AT THE OFFICES OF
THE COMPANY SET FORTH ON PAGE ONE OF THIS PROXY STATEMENT.
By order of the Board of Directors,
Plainsboro, New Jersey /s/John B. Henneman, III
April 20, 2001 John B. Henneman, III
SECRETARY
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INTEGRA LIFESCIENCES
HOLDINGS CORPORATION
2001 EQUITY INCENTIVE PLAN
WHEREAS, Integra LifeSciences Holdings Corporation (the "Company")
desires to have the ability to award certain equity-based benefits and/or loans
to certain Key Employees and Associates;
NOW, THEREFORE, the Integra LifeSciences Holdings Corporation 2001
Equity Incentive Plan is hereby adopted under the following terms and
conditions:
1. Purpose. The Plan is intended to provide a means whereby the
Company may grant ISOs to Key Employees and may grant NQSOs, Restricted Stock,
Stock Appreciation Rights, Performance Stock, Contract Stock, Dividend
Equivalent Rights, and/or Loans to Key Employees and Associates. Thereby, the
Company expects to attract and retain such Key Employees and Associates and to
motivate them to exercise their best efforts on behalf of the Company and its
Related Corporations and any Affiliates.
2. Definitions
(a) "Affiliate" shall mean an entity in which the Company or a
Related Corporation has a 50 percent or greater equity interest.
(b) "Associate" shall mean a designated nonemployee director,
consultant, or other person providing services to the Company, a Related
Corporation, or an Affiliate.
(c) "Award" shall mean ISOs, NQSOs, Restricted Stock, Stock
Appreciation Rights, Performance Stock, Contract Stock, Dividend Equivalent
Rights, and/or Loans awarded by the Committee to a Participant.
(d) "Award Agreement" shall mean a written document evidencing
the grant of an Award, as described in Section 10.1.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Committee" shall mean the Company's Equity Award Committee,
which shall consist solely of not fewer than two directors of the Company who
shall be appointed by, and serve at the pleasure of, the Board (taking into
consideration the rules under section 16(b) of the Exchange Act and the
requirements of section 162(m) of the Code).
(h) "Company" shall mean Integra LifeSciences Holdings
Corporation, a Delaware corporation.
(i) "Contract Date" shall mean the date specified in the Award
Agreement on which a Participant is entitled to receive Contract Stock, provided
he or she is still providing services to the Company, a Related Corporation, or
an Affiliate on such date.
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(j) "Contract Stock" shall mean an Award that entitles the
recipient to receive unrestricted Shares, without payment, if the recipient is
still providing services to the Company or a Related Corporation as of a future
date specified in the Award Agreement.
(k) "Disability" shall mean separation from service as a result
of "permanent and total disability," as defined in section 22(e)(3) of the Code.
(l) "Dividend Equivalent Right" shall mean an Award that
entitles the recipient to receive a benefit in lieu of cash dividends that would
have been payable on any or all Shares subject to another Award granted to the
Participant had such Shares been outstanding.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Fair Market Value" shall mean the following, arrived at by
a good faith determination of the Committee:
(i) if there are sales of Shares on a national securities
exchange or in an over-the-counter market on the date of grant (or on such other
date as value must be determined), then the quoted closing price on such date;
or
(ii) if there are no such sales of Shares on the date of
grant (or on such other date as value must be determined) but there are such
sales on dates within a reasonable period both before and after such date, the
weighted average of the quoted closing price on the nearest date before and the
nearest date after such date on which there were such sales; or
(iii) if actual sales are not available during a reasonable
period beginning before and ending after the date of grant (or on such other
date as value must be determined), then the mean between the bid and asked price
on such date as reported by the National Quotation Bureau; or
(iv) if paragraphs (i) through (iii) above are not
applicable, then such other method of determining fair market value as shall be
adopted by the Committee.
Where the Fair Market Value of Shares is determined under paragraph
(ii) above, the average of the quoted closing prices on the nearest date before
and the nearest date after the last business day prior to the specified date
shall be weighted inversely by the respective numbers of trading days between
the dates of reported sales and such date (i.e., the valuation date), in
accordance with Treas. Reg. ss.20.2031-2(b)(1), or any successor thereto.
(o) "ISO" shall mean an Option which, at the time such Option is
granted under the Plan, qualifies as an incentive stock option within the
meaning of section 422 of the Code, unless the Award Agreement states that the
Option will not be treated as an ISO.
(p) "Key Employee" shall mean an officer, executive, or managerial
or nonmanagerial employee of the Company, a Related Corporation, or an
Affiliate.
(q) "More-Than-10-Percent Shareholder" shall mean any person who at
the time of grant owns, directly or indirectly, or is deemed to own by reason of
the attribution rules of section 424(d) of the Code, Shares possessing more than
10 percent of the total combined voting power of all classes of Shares of the
Company or of a Related Corporation.
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(r) "NQSO" shall mean an Option that, at the time such Option is
granted to a Participant, does not meet the definition of an ISO, whether or not
it is designated as a nonqualified stock option in the Award Agreement.
(s) "Option" is an Award entitling the Participant on exercise
thereof to purchase Shares at a specified exercise price.
(t) "Participant" shall mean a Key Employee or Associate who has been
granted an Award under the Plan.
(u) "Performance Stock" shall mean an Award that entitles the
recipient to receive Shares, without payment, following the attainment of
designated Performance Goals.
(v) "Performance Goals" shall mean goals deemed by the Committee to
be important to the success of the Company or any of its Related Corporations or
Affiliates. The Committee shall establish the specific measures for each such
goal at the time an Award of Performance Stock is granted. In creating these
measures, the Committee may use one or more of the following business criteria:
return on assets, return on net assets, asset turnover, return on equity, return
on capital, market price appreciation of Shares, economic value added, total
stockholder return, net income, pre-tax income, earnings per share, operating
profit margin, net income margin, sales margin, cash flow, market share,
inventory turnover, sales growth, capacity utilization, increase in customer
base, environmental health and safety, diversity, and/or quality. The business
criteria may be expressed in absolute terms or relative to the performance of
other companies or an index.
(w) "Plan" shall mean the Integra LifeSciences Holdings Corporation
2001 Equity Incentive Plan, as set forth herein and as it may be amended from
time to time.
(x) "Related Corporation" shall mean either a "subsidiary
corporation" of the Company, as defined in section 424(f) of the Code, or the
"parent corporation" of the Company (if any), as defined in section 424(e) of
the Code.
(y) "Restricted Stock" shall mean an Award that grants the recipient
at no cost (or entitles the recipient to acquire, for a purchase price to be
specified by the Committee, but in no event less than par value) Shares subject
to whatever restrictions are determined by the Committee.
(z) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(aa) "Shares" shall mean shares of common stock of the Company, par
value $0.01 per share.
(bb) "Stock Appreciation Right" shall mean an Award entitling the
recipient on exercise to receive an amount, in cash or Shares or a combination
thereof (such form to be determined by the Committee), determined in whole or in
part by reference to appreciation in Share value.
3. Administration
(a) The Plan shall be administered by the Committee. Each member of
the Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company. Acts approved by a majority of the
members of the Committee at which a quorum is present, or acts without a meeting
reduced to or approved in writing by a majority of the members of the Committee,
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shall be the valid acts of the Committee. Any authority of the Committee (except
for the authority described in subsection (b)(i)-(iv) below) may be delegated to
a Plan administrator.
(b) The Committee shall have the authority:
(i) to select the Key Employees and Associates to be granted
Awards under the Plan and to grant such Awards at such time or times as it may
choose;
(ii) to determine the type and size of each Award, including the
number of Shares subject to the Award;
(iii) to determine the terms and conditions of each Award;
(iv) to amend an existing Award in whole or in part (including
the extension of the exercise period for any NQSO), except that the Committee
may not (i) lower the exercise price of any Option or the purchase price of any
Restricted Stock, or (ii) without the consent of the Participant holding the
Award, take any action under this clause if such action would adversely affect
the rights of such Participant;
(v) to adopt, amend, and rescind rules and regulations for the
administration of the Plan;
(vi) to interpret the Plan and decide any questions and settle
any controversies that may arise in connection with it; and
(vii) to adopt such modifications, amendments, procedures,
sub-plans, and the like, which may be inconsistent with the provisions of the
Plan, as may be necessary to comply with the laws and regulations of other
countries in which the Company, Related Corporations, and Affiliates operate in
order to assure the viability of Awards granted under the Plan to individuals in
such other countries.
Such determinations and actions of the Committee, and all other
determinations and actions of the Committee made or taken under authority
granted by any provision of the Plan, shall be conclusive and shall bind all
parties. Nothing in this subsection (b) shall be construed as limiting the power
of the Board or the Committee to make the adjustments described in Sections 8.3
and 8.4.
4. Effective Date and Term of Plan
(a) Effective Date. The Plan, having been adopted by the Board on
February 22, 2001, shall become effective on that date, but subject to the
approval of the stockholders of the Company pursuant to Section 9(b). Awards may
be granted under the Plan prior to such stockholder approval (but after the
Board's adoption of the Plan), subject to such stockholder approval.
(b) Term of Plan for ISOs. No ISO may be granted under the Plan after
February 21, 2011, but ISOs previously granted may extend beyond that date.
Awards other than ISOs may be granted after that date.
5. Shares Subject to the Plan. The aggregate number of Shares that
may be delivered under the Plan is 2,000,000. Further, no Key Employee shall
receive Options and/or Stock Appreciation Rights for more than 1,000,000 Shares
during any calendar year under the Plan. However, the limits in the preceding
two sentences shall be subject to the adjustment described in Section 8.3.
Shares delivered
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under the Plan may be authorized but unissued Shares or reacquired Shares, and
the Company may purchase Shares required for this purpose, from time to time, if
it deems such purchase to be advisable. If any Award that requires the
Participant to exercise it in order for Shares to be delivered terminates
without having been exercised in full, or if any Award that is payable in Shares
or cash is satisfied in cash rather than in Shares, the number of Shares as to
which such Award was not exercised or for which cash was substituted shall
continue to be available for future Awards granted under the Plan.
6. Eligibility. The class of individuals who shall be eligible to
receive Awards under the Plan shall be the Key Employees (including any
directors of the Company who are also officers or Key Employees) and the
Associates. More than one Award may be granted to a Key Employee or Associate
under the Plan.
7. Types of Awards
7.1 Options
(a) Kinds of Options. Both ISOs and NQSOs may be granted by the
Committee under the Plan. However, ISOs may only be granted to Key Employees of
the Company or of a Related Corporation. NQSOs may be granted to both Key
Employees and Associates. Once an ISO has been granted, no action by the
Committee that would cause the Option to lose its status as an ISO under the
Code will be effective without the consent of the Participant holding the
Option.
(b) $100,000 Limit. The aggregate Fair Market Value of the Shares
with respect to which ISOs are exercisable for the first time by a Key Employee
during any calendar year (counting ISOs under this Plan and under any other
stock option plan of the Company or a Related Corporation) shall not exceed
$100,000. If an Option intended as an ISO is granted to a Key Employee and the
Option may not be treated in whole or in part as an ISO pursuant to the $100,000
limit, the Option shall be treated as an ISO to the extent it may be so treated
under the limit and as an NQSO as to the remainder. For purposes of determining
whether an ISO would cause the limit to be exceeded, ISOs shall be taken into
account in the order granted. The annual limits set forth above for ISOs shall
not apply to NQSOs.
(c) Exercise Price. The exercise price of an Option shall be
determined by the Committee, subject to the following:
(i) The exercise price of an ISO shall not be less than 100
percent (110 percent in the case of an ISO granted to a More-Than-10-Percent
Shareholder) of the Fair Market Value of the Shares subject to the Option,
determined as of the time the Option is granted.
(ii) In no case may the exercise price paid for Shares be less
than the par value per Share.
(d) Term of Options. The term of each Option may not be more than 10
years (five years, in the case of an ISO granted to a More-Than-10-Percent
Shareholder) from the date the Option was granted, or such earlier date as may
be specified in the Award Agreement.
(e) Exercise of Options. An Option shall become exercisable at such
time or times (but not less than three months from the date of grant), and on
such conditions, as the Committee may specify. The Committee may at any time and
from time to time accelerate the time at which all or any part of the Option may
be exercised. Any exercise of an Option must be in writing, signed by the proper
person, and delivered or mailed to the Company, accompanied by (i) any other
documents required by the Committee and (ii) payment in full in accordance with
subsection (f) below for the number of Shares for which the
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Option is exercised (except that, in the case of an exercise arrangement
approved by the Committee and described in subsection (f)(iv) below, payment may
be made as soon as practicable after the exercise). Only full shares shall be
issued under the Plan, and any fractional share that might otherwise be issuable
upon exercise of an Option granted hereunder shall be forfeited.
(f) Payment for Shares. Shares purchased on the exercise of an Option
shall be paid for as follows:
(i) in cash or by check (acceptable to the Committee), bank
draft, or money order payable to the order of the Company;
(ii) in Shares previously acquired by the Participant; provided,
however, that if such Shares were acquired through the exercise of an ISO and
are used to pay the Option price of an ISO, such Shares have been held by the
Participant for a period of not less than the holding period described in
section 422(a)(1) of the Code on the date of exercise, or if such Shares were
acquired through the exercise of an NQSO and are used to pay the Option price of
an ISO, or if such Shares were acquired through the exercise of an ISO or an
NQSO and are used to pay the Option price of an NQSO, such Shares have been held
by the Participant for such period of time as required to be considered "mature"
Shares for purposes of accounting treatment;
(iii) in shares newly acquired by the Participant upon exercise
of such Option (which shall constitute a disqualifying disposition in the case
of ISOs);
(iv) by delivering a properly executed notice of exercise of the
Option to the Company and a broker, with irrevocable instructions to the broker
promptly to deliver to the Company the amount of sale or loan proceeds necessary
to pay the exercise price of the Option; or
(v) by any combination of the above-listed forms of payment.
In the event the Option price is paid, in whole or in part, with
Shares, the portion of the Option price so paid shall be equal to the Fair
Market Value on the date of exercise of the Option of the Shares surrendered in
payment of such Option price.
7.2 Stock Appreciation Rights
(a) Grant of Stock Appreciation Rights. Stock Appreciation Rights may
be granted to a Key Employee or Associate by the Committee. Stock Appreciation
Rights may be granted in tandem with, or independently of, Options granted under
the Plan. A Stock Appreciation Right granted in tandem with an Option that is
not an ISO may be granted either at or after the time the Option is granted. A
Stock Appreciation Right granted in tandem with an ISO may be granted only at
the time the ISO is granted.
(b) Nature of Stock Appreciation Rights. A Stock Appreciation Right
entitles the Participant to receive, with respect to each Share as to which the
Stock Appreciation Right is exercised, the excess of the Share's Fair Market
Value on the date of exercise over its Fair Market Value on the date the Stock
Appreciation Right was granted. Such excess shall be paid in cash, Shares, or a
combination thereof, as determined by the Committee.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights
are granted in tandem with Options, the number of Stock Appreciation Rights
granted to a Participant that shall be exercisable during a specified period
shall not exceed the number of Shares that the Participant may purchase upon the
exercise of the related Option during such period. Upon the exercise of an
Option, the
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Stock Appreciation Right relating to the Shares covered by such Option will
terminate. Upon the exercise of a Stock Appreciation Right, the related Option
will terminate to the extent of an equal number of Shares. The Stock
Appreciation Right will be exercisable only at such time or times, and to the
extent, that the related Option is exercisable and will be exercisable in
accordance with the procedure required for exercise of the related Option. The
Stock Appreciation Right will be transferable only when the related Option is
transferable, and under the same conditions. A Stock Appreciation Right granted
in tandem with an ISO may be exercised only when the Fair Market Value of the
Shares subject to the ISO exceeds the exercise price of such ISO.
(d) Exercise of Independent Stock Appreciation Rights. A Stock
Appreciation Right not granted in tandem with an Option shall become exercisable
at such time or times, and on such conditions, as the Committee may specify in
the Award Agreement. The Committee may at any time accelerate the time at which
all or any part of the Stock Appreciation Right may be exercised. Any exercise
of an independent Stock Appreciation Right must be in writing, signed by the
proper person, and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
7.3 Restricted Stock
(a) General Requirements. Restricted Stock may be issued or
transferred to a Key Employee or Associate for consideration or for no
consideration, as determined by the Committee. If for consideration, the
Participant's payment may be in cash or check (acceptable to the Committee),
bank draft, or money order payable to the order of the Company.
(b) Rights as a Stockholder. Unless the Committee determines
otherwise, a Key Employee or Associate who receives Restricted Stock shall have
certain rights of a stockholder with respect to the Restricted Stock, including
voting and dividend rights, subject to the restrictions described in subsection
(c) below and any other conditions imposed by the Committee at the time of
grant. Unless the Committee determines otherwise, certificates evidencing shares
of Restricted Stock will remain in the possession of the Company until such
Shares are free of all restrictions under the Plan.
(c) Restrictions. Except as otherwise specifically provided by the
Plan, Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise encumbered or disposed of, and if the Participant ceases to provide
services to any of the Company and its Related Corporations and Affiliates for
any reason, must be offered to the Company for purchase for the amount paid for
the Shares, or forfeited to the Company if nothing was so paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Committee may specify in the Award Agreement. Upon the lapse of all
restrictions, the Shares will cease to be Restricted Stock for purposes of the
Plan. The Committee may at any time accelerate the time at which the
restrictions on all or any part of the Shares will lapse.
(d) Notice of Tax Election. Any Participant making an election under
section 83(b) of the Code for the immediate recognition of income attributable
to an Award of Restricted Stock must provide a copy thereof to the Company
within 10 days of the filing of such election with the Internal Revenue Service.
7.4 Performance Stock; Performance Goals
(a) Grant. The Committee may grant Performance Stock to any Key
Employee or Associate, conditioned upon the meeting of designated Performance
Goals. The Committee shall determine the number of Shares of Performance Stock
to be granted.
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(b) Performance Period and Performance Goals. When Performance Stock
is granted, the Committee shall establish the performance period during which
performance shall be measured, the Performance Goals, and such other conditions
of the Award as the Committee deems appropriate.
(c) Delivery of Performance Stock. At the end of each performance
period, the Committee shall determine to what extent the Performance Goals and
other conditions of the Award have been met and the number of Shares, if any, to
be delivered with respect to the Award.
7.5 Contract Stock
(a) Grant. The Committee may grant Contract Stock to any Key Employee
or Associate, conditioned upon the Participant's continued provision of services
to the Company and its Related Corporations and Affiliates through the date
specified in the Award Agreement. The Committee shall determine the number of
Shares of Contract Stock to be granted.
(b) Contract Date. When Contract Stock is granted, the Committee
shall establish the Contract Date on which the Contract Stock shall be delivered
to the Participant, provided the Participant is still providing services to the
Company and its Related Corporations and Affiliates on such date.
(c) Delivery of Contract Stock. If the Participant is still providing
services to the Company and its Related Corporations and Affiliates as of the
Contract Date, the Committee shall cause the Contract Stock to be delivered to
the Participant in accordance with the terms of the Award Agreement.
7.6 Dividend Equivalent Rights. The Committee may provide for payment
to a Key Employee or Associate of Dividend Equivalent Rights, either currently
or in the future, or for the investment of such Dividend Equivalent Rights on
behalf of the Participant.
7.7 Loans. The Committee may authorize a Loan from the Company to a
Key Employee or Associate, either on the date of or after the grant of any Award
to the Participant (except that the ability of the Committee to authorize a Loan
in connection with an Award of ISOs must be included in the Participant's Award
Agreement at the time of the Award). A Loan may be made either in connection
with the purchase of Shares under the Award or with the payment of any Federal,
state, and local income tax with respect to income recognized as a result of the
Award. The Committee will have full authority to decide whether to make a Loan
and to determine the amount, terms, and conditions of the Loan, whether the Loan
is to be secured or unsecured, the terms on which the Loan is to be repaid, and
the conditions, if any, under which it may be forgiven. However, the Loan will
be made on the Participant's personal, negotiable, demand promissory note, and
will bear interest at a rate not lower than the lowest rate that will avoid the
imputation of interest under section 7872 of the Code.
8. Events Affecting Outstanding Awards
8.1 Termination of Service (Other Than by Death or Disability). If a
Participant ceases to provide services to the Company and its Related
Corporations and Affiliates for any reason other than death or Disability, as
the case may be, the following shall apply:
(a) Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Participant's termination of service shall terminate at
that time. Any Options or Stock Appreciation Rights that were exercisable
immediately prior to the termination of service will continue to be exercisable
for six months (or for such longer period as the Committee may determine), and
shall
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thereupon terminate, unless the Award Agreement provides by its terms for
immediate termination or for termination in less than six months in the event of
termination of service. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it could
have been exercised without regard to this Section. For purposes of this
subsection (a), a termination of service shall not be deemed to have resulted by
reason of a sick leave or other bona fide leave of absence approved for purposes
of the Plan by the Committee.
(b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant at the time of the termination of service must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock shall be so
transferred without any further action by the Participant), in accordance with
Section 7.3.
(c) Except as otherwise determined by the Committee, all Performance
Stock, Contract Stock, and Dividend Equivalent Rights to which the Participant
was not irrevocably entitled prior to the termination of service shall be
forfeited and the Awards canceled as of the date of such termination of service.
(d) Payment of any outstanding Loan upon a Participant's termination
of service shall be governed by the terms of the loan agreement entered into by
the Company and the Participant.
8.2 Death or Disability. If a Participant dies or incurs a
Disability, the following shall apply:
(a) Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by the Participant immediately prior to death or
Disability, as the case may be, to the extent then exercisable, may be exercised
by the Participant or by the Participant's legal representative (in the case of
Disability), or by the Participant's executor or administrator or by the person
or persons to whom the Option or Stock Appreciation Right is transferred by will
or the laws of descent and distribution, at any time within the one-year period
ending with the first anniversary of the Participant's death or Disability (or
such shorter or longer period as the Committee may determine), and shall
thereupon terminate. In no event, however, shall an Option or Stock Appreciation
Right remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section. Except as otherwise determined by the
Committee, all Options and Stock Appreciation Rights held by a Participant
immediately prior to death or Disability that are not then exercisable shall
terminate at the date of death or Disability.
(b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant at the date of death or Disability, as the case
may be, must be transferred to the Company (and, in the event the certificates
representing such Restricted Stock are held by the Company, such Restricted
Stock shall be so transferred without any further action by the Participant), in
accordance with Section 7.3.
(c) Except as otherwise determined by the Committee, all Performance
Stock, Contract Stock, and Dividend Equivalent Rights to which the Participant
was not irrevocably entitled prior to death or Disability, as the case may be,
shall be forfeited and the Awards canceled as of the date of death or
Disability.
(d) Payment of any outstanding Loan upon a Participant's death or
Disability shall be governed by the terms of the loan agreement entered into by
the Company and the Participant.
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8.3 Capital Adjustments. The number of Shares that may be delivered
under the Plan, the maximum number of Shares that may be made subject to ISOs,
and the maximum number of Shares with respect to which Options or Stock
Appreciation Rights may be granted to any Key Employee or Associate under the
Plan, all as stated in Section 5, and the number of Shares issuable upon the
exercise or vesting of outstanding Awards under the Plan (as well as the
exercise price per Share under outstanding Options), shall be proportionately
adjusted, as may be deemed appropriate by the Committee, to reflect any increase
or decrease in the number of issued Shares resulting from a subdivision
(share-split), consolidation (reverse split), stock dividend, or similar change
in the capitalization of the Company.
8.4 Certain Corporate Transactions
(a) In the event of a corporate transaction (as, for example, a
merger, consolidation, acquisition of property or stock, separation,
reorganization, or liquidation), each outstanding Award shall be assumed by the
surviving or successor entity; provided, however, that in the event of a
proposed corporate transaction, the Committee may terminate all or a portion of
any outstanding Award, effective upon the closing of the corporate transaction,
if it determines that such termination is in the best interests of the Company.
If the Committee decides to terminate outstanding Options or Stock Appreciation
Rights, the Committee shall give each Participant holding an Option or Stock
Appreciation Right to be terminated not less than seven days' notice prior to
any such termination, and any Option or Stock Appreciation Right that is to be
so terminated may be exercised (if and only to the extent that it is then
exercisable) up to, and including the date immediately preceding such
termination. Further, the Committee, in its discretion, may (i) accelerate, in
whole or in part, the date on which any or all Options and Stock Appreciation
Rights become exercisable, (ii) remove the restrictions from the outstanding
Shares of Restricted Stock, (iii) cause the delivery of any Performance Stock,
even if the associated Performance Goals have not been met, (iv) cause the
delivery of any Contract Stock, even if the Contract Date has not been reached;
(v) cause the payment of any Dividend Equivalent Rights, and/or (vi) forgive all
or any portion of the principal of, or interest on, a Loan. The Committee also
may, in its discretion, change the terms of any outstanding Award to reflect any
such corporate transaction, provided that, in the case of ISOs, such change
would not constitute a "modification" under section 424(h) of the Code, unless
the Participant consents to the change.
(b) With respect to an outstanding Award held by a Participant who,
following the corporate transaction, will be employed by or otherwise providing
services to an entity which is a surviving or acquiring entity in such
transaction or an affiliate of such an entity, the Committee may, in lieu of the
action described in subsection (a) above, arrange to have such surviving or
acquiring entity or affiliate grant to the Participant a replacement award
which, in the judgment of the Committee, is substantially equivalent to the
Award.
8.5 Exercise Upon Change in Control
(a) Notwithstanding any other provision of this Plan, all outstanding
Options and all Stock Appreciation Rights shall become fully vested and
exercisable, all Performance Stock and all Dividend Equivalent Rights shall
become fully vested, all Contract Stock shall become immediately payable, and
all restrictions shall be removed from any outstanding Shares of Restricted
Stock, upon a Change in Control.
(b) "Change in Control" shall mean:
(i) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any "Person" (as such
term is used for purposes of section 13(d) or 14(d) of the Exchange Act)
immediately after which such Person has "Beneficial Ownership" (within
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the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50 percent or
more of the combined voting power of all the then outstanding Voting Securities,
other than the Company, any trustee or other fiduciary holding securities under
any employee benefit plan of the Company or an affiliate thereof, or any
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company;
provided, however, that any acquisition from the Company or any acquisition
pursuant to a transaction which complies with paragraph (iii)(A) and (B) below
shall not be a Change in Control under this paragraph (i);
(ii) The individuals who, as of March 1, 2000, are members of the
Board (the "Incumbent Board") cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or nomination
for election by the shareholders, of any new director was approved by a vote of
at least two-thirds of the members of the Board who constitute Incumbent Board
members, such new directors shall for all purposes be considered as members of
the Incumbent Board as of March 1, 2000, provided further, however, that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors (a "Proxy
Contest") including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest;
(iii) consummation by the Company of a reorganization, merger, or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets or stock of another entity (a
"Business Combination"), unless immediately following such Business Combination:
(A) more than 50 percent of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of (I)
the corporation resulting from such Business Combination (the "Surviving
Corporation"), or (II) if applicable, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries (the "Parent Corporation"),
is represented, directly or indirectly, by Company Voting Securities outstanding
immediately prior to such Business Combination (or, if applicable, is
represented by shares into which such Company Voting Securities were converted
pursuant to such Business Combination), and such voting power among the holders
thereof is in substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Company Voting Securities; and (B) at
least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
were members of the Incumbent Board at the time of the execution of the initial
agreement, or the action of the Board, providing for such Business Combination;
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(v) acceptance by the shareholders of the Company of shares in a
share exchange if the shareholders of the Company immediately before such share
exchange do not own, directly or indirectly, immediately following such share
exchange more than 50 percent of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such share exchange in
substantially the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
9. Amendment or Termination of the Plan
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(a) In General. The Board, pursuant to a written resolution, may from
time to time suspend or terminate the Plan or amend it, and, except as provided
in Section 3(b)(iv), 7.1(a), and 8.4(a), the Committee may amend any outstanding
Awards in any respect whatsoever; except that, without the approval of the
shareholders (given in the manner set forth in subsection (b) below):
(i) no amendment may be made that would:
(A) change the class of employees eligible to participate
in the Plan with respect to ISOs;
(B) except as permitted under Section 8.3, increase the
maximum number of Shares with respect to which ISOs may
be granted under the Plan; or
(C) extend the duration of the Plan under Section 4(b) with
respect to any ISOs granted hereunder; and
(ii) no amendment may be made that would constitute a
modification of the material terms of the "performance goal" within the meaning
of Treas. Reg.SS.1.162-27(e)(4)(vi) or any successor thereto (to the extent
compliance with section 162(m) of the Code is desired).
Notwithstanding the foregoing, no such termination or amendment shall
materially impair the rights of any Participant holding an outstanding Award
without the consent of such Participant.
(b) Manner of Shareholder Approval. The approval of shareholders must
be effected by a majority of the votes cast (including abstentions, to the
extent abstentions are counted as voting under applicable state law) in a
separate vote at a duly held shareholders' meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting on the Plan.
10. Miscellaneous
10.1 Documentation of Awards. Awards shall be evidenced by such
written Award Agreements, if any, as may be prescribed by the Committee from
time to time. Such instruments may be in the form of agreements to be executed
by both the Participant and the Company, or certificates, letters, or similar
instruments, which need not be executed by the Participant but acceptance of
which will evidence agreement to the terms thereof.
10.2 Rights as a Stockholder. Except as specifically provided by the
Plan or an Award Agreement, the receipt of an Award shall not give a Participant
rights as a stockholder; instead, the Participant shall obtain such rights,
subject to any limitations imposed by the Plan or the Award Agreement, upon the
actual receipt of Shares.
10.3 Conditions on Delivery of Shares. The Company shall not deliver
any Shares pursuant to the Plan or remove restrictions from Shares previously
delivered under the Plan (i) until all conditions of the Award have been
satisfied or removed, (ii) until all applicable Federal and state laws and
regulations have been complied with, and (iii) if the outstanding Shares are at
the time of such delivery listed on any stock exchange, until the Shares to be
delivered have been listed or authorized to be listed on such exchange. If an
Award is exercised by the Participant's legal representative, the Company will
be under no obligation to deliver Shares pursuant to such exercise until the
Company is satisfied as to the authority of such representative.
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10.4 Investment Purpose. Each Award shall be granted on the condition
that the purchase or grant of Shares thereunder shall be for investment purposes
and not with a view to resale or distribution, except that in the event the
Shares subject to such Award are registered under the Securities Act, or in the
event a resale of such Shares without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Company such condition is not required under the Securities Act or any
other applicable law, regulation, or rule of any governmental agency.
10.5 Registration and Listing of Shares. If the Company shall deem it
necessary to register under the Securities Act or any other applicable statute
any Shares purchased under this Plan, or to qualify any such Shares for an
exemption from any such statutes, the Company shall take such action at its own
expense. If Shares are listed on any national securities exchange at the time
any Shares are purchased hereunder, the Company shall make prompt application
for the listing on such national securities exchange of such Shares, at its own
expense. Purchases and grants of Shares hereunder shall be postponed as
necessary pending any such action.
10.6 Compliance with Rule 16b-3. All elections and transactions under
this Plan by persons subject to Rule 16b-3, promulgated under section 16(b) of
the Exchange Act, or any successor to such Rule, are intended to comply with at
least one of the exemptive conditions under such Rule. The Committee shall
establish such administrative guidelines to facilitate compliance with at least
one such exemptive condition under Rule 16b-3 as the Committee may deem
necessary or appropriate.
10.7 Tax Withholding
(a) Obligation to Withhold. The Company shall withhold from any cash
payment made pursuant to an Award an amount sufficient to satisfy all Federal,
state, and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Shares may be delivered, the Committee
may require that the Participant or other appropriate person remit to the
Company an amount sufficient to satisfy the withholding requirements, or make
other arrangements satisfactory to the Committee with regard to such
requirements, prior to the delivery of any Shares.
(b) Election to Withhold Shares. The Committee, in its discretion,
may permit or require the Participant to satisfy the federal, state, and/or
local withholding tax, in whole or in part, by electing to have the Company
withhold Shares (or by returning previously acquired Shares to the Company);
provided, however, that the Company may limit the number of Shares withheld to
satisfy the tax withholding requirements to the extent necessary to avoid
adverse accounting consequences. Shares shall be valued, for purposes of this
subsection (b), at their Fair Market Value (determined as of the date an amount
is includible in income by the Participant (the "Determination Date"), rather
than the date of grant). If Shares acquired by the exercise of an ISO are used
to satisfy the withholding requirement described above, such Shares must have
been held by the Participant for a period of not less than the holding period
described in section 422(a)(1) of the Code as of the Determination Date. The
Committee shall adopt such withholding rules as it deems necessary to carry out
the provisions of this subsection (b).
10.8 Transferability of Awards. No ISO may be transferred other than
by will or by the laws of descent and distribution. Any other Award may be
transferred to the extent permitted by applicable law, except as otherwise
provided in the applicable Award Agreement. During a Participant's lifetime, an
Award requiring exercise may be exercised only by the Participant (or, in the
event of the Participant's incapacity, by the person or persons legally
appointed to act on the Participant's behalf).
10.9 Registration. If the Participant is married at the time Shares
are delivered and if the Participant so requests at such time, the certificate
or certificates for such Shares shall be registered in the name of the
Participant and the Participant's spouse, jointly, with right of survivorship.
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10.10 Acquisitions. Notwithstanding any other provision of this Plan,
Awards may be granted hereunder in substitution for awards held by directors,
key employees, and associates of other corporations who are about to, or have,
become Key Employees or Associates as a result of a merger, consolidation,
acquisition of assets, or similar transaction by the Company or a Related
Corporation or (in the case of Awards other than ISOs) an Affiliate. The terms
of the substitute Awards so granted may vary from the terms set forth in this
Plan to such extent as the Committee may deem appropriate to conform, in whole
or in part, to the provisions of the awards in substitution for which they are
granted.
10.11 Replacement of Outstanding Options. The Committee shall have the
authority to cancel, at any time and from time to time, with the consent of the
affected Participants, any or all outstanding Options under the Plan and to
grant in substitution therefor, but not within six months before or after such
cancellation, new Options under the Plan covering the same or a different number
of Shares but having a per share purchase price not less than the greater of par
value or 100 percent of the Fair Market Value of a Share on the new date of the
grant. The Committee may permit the voluntary surrender of all or a portion of
any Option to be conditioned upon the granting to the Participant under the Plan
of a new Option for the same or a different number of Shares as the Option
surrendered, or may require such voluntary surrender as a condition precedent to
a grant of a new Option to such Participant. Any new Option shall be exercisable
at the price, during the period, and in accordance with any other terms and
conditions specified by the Committee at the time the new Option is granted, all
determined in accordance with the provisions of the Plan without regard to the
price, period of exercise, and any other terms or conditions of the Option
surrendered.
10.12 Employment Rights. Neither the adoption of the Plan nor the
grant of Awards will confer upon any person any right to continued employment by
the Company or any of its Related Corporations or Affiliates or affect in any
way the right of any of the foregoing to terminate an employment relationship at
any time.
10.13 Indemnification of Board and Committee. Without limiting any
other rights of indemnification that they may have from the Company or any of
its Related Corporations or Affiliates, the members of the Board and the members
of the Committee shall be indemnified by the Company against all costs and
expenses reasonably incurred by them in connection with any claim, action, suit,
or proceeding to which they or any of them may be a party by reason of any
action taken or failure to act under, or in connection with, the Plan or any
Award granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such action, suit,
or proceeding, except a judgment based upon a finding of willful misconduct or
recklessness on their part. Upon the making or institution of any such claim,
action, suit, or proceeding, the Board or Committee member shall notify the
Company in writing, giving the Company an opportunity, at its own expense, to
handle and defend the same before such Board or Committee member undertakes to
handle it on his or her own behalf. The provisions of this Section shall not
give members of the Board or the Committee greater rights than they would have
under the Company's by-laws or Delaware law.
10.14 Application of Funds. Any cash proceeds received by the Company
from the sale of Shares pursuant to Awards granted under the Plan shall be added
to the general funds of the Company. Any Shares received in payment for
additional Shares upon exercise of an Option shall become treasury stock.
10.15 Governing Law. Except as provided in Section 10.13, the Plan
shall be governed by the applicable Code provisions to the maximum extent
possible. Otherwise, the laws of the State of New Jersey (without reference to
the principles of conflict of laws) shall govern the operation of, and the
rights of Participants under, the Plan and Awards granted hereunder.
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APPENDIX B
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
FIRST AMENDMENT TO CERTIFICATE OF
DESIGNATION, RIGHTS AND PREFERENCES OF
SERIES B CONVERTIBLE PREFERRED STOCK OF
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
INTEGRA LIFESCIENCES HOLDINGS CORPORATION ("Integra"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
That the Board of Directors of Integra, at a meeting held on February
16, 2000, adopted a resolution proposing and declaring advisable the following
amendments to the Certificate of Designation, Rights and Preferences of Series B
Convertible Preferred Stock of Integra:
RESOLVED, that the Certificate of Designation, Rights and Preferences
of Series B Convertible Preferred Stock of Integra Lifesciences Holdings
Corporation be amended by changing paragraphs 3, 4 and 9 thereof so that, as
amended, said paragraphs shall be and read in their entirety as follows:
"3. Dividends.
(a) The holders of Series B Convertible Preferred Stock
shall be entitled to receive, out of funds legally available for such
purpose, annual cumulative dividends which shall accrue at the rate of
10% per annum, payable upon the liquidation, dissolution or winding up
of the Corporation.
(b) Dividends on each share of Series B Convertible
Preferred Stock shall be cumulative and shall accrue from the date of
issuance of such share of Series B Convertible Preferred Stock. The
date on which the Corporation initially issues any share of Series B
Convertible Preferred Stock shall be deemed to be its "Issue Date",
regardless of the number of times of transfer of such shares is made
on the stock records maintained by or for the Corporation and
regardless of the number of certificates that may be issued to
evidence such share.
(c) In addition to the right to receive dividends pursuant
to Section 3(a) above, each holder of a share of Series B Convertible
Preferred Stock shall have the right, at any time after the Issue
Date, if the Board of Directors of the Corporation shall declare a
dividend or make any other distribution (including, without
limitation, in cash or other property or assets, but excluding any
stock split effected as a stock dividend) to holders of shares of
Common Stock, to receive, out of funds legally available therefor, a
dividend or distribution in an amount equal to the amount of such
dividend or distribution receivable by a holder of the number of
shares of Common Stock into which such share of Series B Convertible
Preferred Stock is convertible on the record date for such dividend or
distribution. Any such amount shall be paid to the holders of shares
of Series B Convertible Preferred Stock at the same time such dividend
or distribution is made to the holders of Common Stock."
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"4. Liquidation.
(d) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, in which all or
substantially all of the consideration, if any, received by the
Corporation or its stockholders is in cash, the holders of the shares
of Series B Convertible Preferred Stock shall be paid, before any
distribution or payment is made upon any stock ranking on liquidation
junior to the Series B Convertible Preferred Stock, an amount equal to
the greater of (i) $100 per share plus, in the case of each share, an
amount equal to any dividends declared but unpaid thereon, through the
date payment thereof is made available (the "Redemption Payment"), and
(ii) the amount that the holders of the Series B Convertible Preferred
Stock would receive if they were to convert each share of Series B
Convertible Preferred Stock into shares of Common Stock immediately
prior to such liquidation, dissolution or winding up (such amount
payable with respect to one share of Series B Convertible Preferred
Stock being sometimes referred to as the "Liquidation Payment" and
with respect to all shares of Series B Convertible Preferred Stock
being sometimes referred to as the "Liquidation Payments").
(e) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, in which all or
substantially all of the consideration, if any, received by the
Corporation or its stockholders is in securities, the Corporation
shall have the option, at its election, of paying such Liquidation
Payments to the holders of the shares of Series B Convertible
Preferred Stock in cash or in a preferred security of the successor
entity having terms substantially similar to the Series B Convertible
Preferred Stock.
(f) If upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series B Convertible Preferred Stock
shall be insufficient to permit payment to the holders of Series B
Convertible Preferred Stock of the Liquidation Payments, then the
entire assets of the Corporation to be so distributed shall be
distributed ratably among the holders of Series B Convertible
Preferred Stock. Upon any liquidation, dissolution or winding up of
the Corporation, after the holders of Series B Convertible Preferred
Stock shall have been paid in full the Liquidation Payments
respectively, to which they shall be entitled, the Series B
Convertible Preferred Stock shall be automatically canceled and the
remaining net assets of the Corporation may be distributed to the
holders of stock ranking on liquidation junior to the Series B
Convertible Preferred Stock.
(g) Written notice of such liquidation, dissolution or
winding up, stating a payment date, the amount of the Liquidation
Payments and the place where said Liquidation Payments shall be
payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or
telex, not less than 10 days prior to the payment date stated therein,
to the holders of record of Series B Convertible Preferred Stock, such
notice to be addressed to each such holder at its address as shown by
the records of the Corporation.
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(h) For purposes of this paragraph 4, a liquidation,
dissolution or winding up of the Corporation shall be deemed to
include (i) the Corporation's sale of all or substantially all of its
assets or (ii) the merger or consolidation of the Corporation into or
with any other corporation, in which all or substantially all of the
consideration received by the Corporation or its stockholders in
connection with such sale, merger or consolidation is: (x) in cash, or
(y) in securities of the acquiring company or an affiliate thereof
having a fair market value per share of Common Stock which is lower
than the Conversion Price (as defined below) as last adjusted and in
effect at the date of such liquidation, dissolution or winding up;
provided that a liquidation, dissolution or winding up of the
Corporation shall not include a sale, merger or consolidation in which
all or substantially all of the consideration received by the
Corporation or its stockholders in connection therewith is in
securities of the acquiring company or an affiliate thereof having a
fair market value per share of Common Stock which is equal to or
greater than the Conversion Price as last adjusted and in effect on
the date of such liquidation, dissolution or winding up.
(i) The Series B Convertible Preferred Stock shall, with
respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation, rank on a parity with
any class or series of capital stock of the Corporation hereafter
created which expressly provides that it ranks on a parity with the
Series B Convertible Preferred Stock with respect to distribution of
assets and rights upon the liquidation, dissolution or winding up of
the Corporation. The Series B Convertible Preferred Stock shall, with
respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation, rank senior to (i) the
Corporation's Series A Convertible Preferred Stock, $.01 par value per
share, and (ii) each class or series of capital stock of the
Corporation hereafter created which does not expressly provide that it
ranks on a parity with or senior to the Series B Convertible Preferred
Stock with respect to distribution of assets and rights upon the
liquidation, dissolution or winding up of the Corporation."
"9. Optional Redemption.
(a) For the purposes of this paragraph 9 the "Target Market
Price" shall mean an amount equal to: (i) in the twelve-month period
commencing on March 15, 2001, 2.5 times the Conversion Price as last
adjusted and then in effect; (ii) in the twelve-month period
commencing on March 15, 2002, 3.25 times the Conversion Price as last
adjusted and then in effect; and (iii) in the twelve-month period
commencing on March 15, 2003, 4 times the Conversion Price as last
adjusted and then in effect.
(b) If, at any time after March 15, 2001, for a period of
not less than thirty (30) consecutive trading days, the average
closing price of the Corporation's Common Stock on the principal
securities exchange or market on which such shares are then traded has
been equal to or greater than the Target Market Price, then the
Corporation may, at the option of the Board of Directors of the
Corporation, redeem from any source of funds legally available
therefor, in whole or in part, in the manner provided herein, any or
all whole number of shares of Series C Convertible Preferred Stock at
any time outstanding for a
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cash amount per share to be redeemed equal to the Redemption Payment
as defined in paragraph 4 (the "Redemption Price").
(c) Notwithstanding the foregoing, at any time and from
time to time after March 15, 2004, the Corporation may, at the option
of the Board of Directors of the Corporation, redeem from any source
of funds legally available therefor, in whole or in part, in the
manner provided herein, any or all whole number of shares of Series B
Convertible Preferred Stock at any time outstanding for an amount per
share to be redeemed equal to the Redemption Price."
IN WITNESS WHEREOF, this Certificate has been executed as of this 21st
day of March, 2000, by the undersigned.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
By:/s/ Stuart M. Essig
-----------------------------------------
Name: Stuart M. Essig
Title: President
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APPENDIX C
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
SECOND AMENDMENT TO CERTIFICATE OF
DESIGNATION, RIGHTS AND PREFERENCES OF
SERIES B CONVERTIBLE PREFERRED STOCK AND FIRST
AMENDMENT TO CERTIFICATE OF DESIGNATION,
RIGHTS AND PREFERENCES OF SERIES C CONVERTIBLE
PREFERRED STOCK OF INTEGRA LIFESCIENCES
HOLDINGS CORPORATION
INTEGRA LIFESCIENCES HOLDINGS CORPORATION ("Integra"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Integra, at a meeting held on
March 6, 2001, adopted the following resolution proposing and declaring
advisable certain amendments (the "Series B Amendment") to the Certificate of
Designation, Rights and Preferences of Series B Convertible Preferred Stock of
Integra:
NOW, THEREFORE, BE IT RESOLVED, that this Board of Directors proposes
and hereby deems advisable that the Certificate of Designation, Rights and
Preferences of Series B Convertible Preferred Stock of Integra Lifesciences
Holdings Corporation (the "Series B Certificate"), be amended as follows:
(1) Amend paragraph 4 thereof so that, as amended, said paragraph
shall be and read in its entirety as follows:
"4. LIQUIDATION.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, in which all or
substantially all of the consideration, if any, received by the
Corporation or its stockholders is in cash, the holders of the shares
of Series B Convertible Preferred Stock shall be paid, before any
distribution or payment is made upon any stock ranking on liquidation
junior to the Series B Convertible Preferred Stock, an amount equal to
the greater of (i) $100 per share (the "Redemption Payment") and (ii)
the amount that the holders of the Series B Convertible Preferred
Stock would receive if they were to convert each share of Series B
Convertible Preferred Stock into shares of Common Stock immediately
prior to such liquidation, dissolution or winding up (such amount
payable with respect to one share of Series B Convertible Preferred
Stock being sometimes referred to as the "Liquidation Payment" and
with respect to all shares of Series B Convertible Preferred Stock
being sometimes referred to as the "Liquidation Payments").
(b) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, in which all or
substantially all of the consideration, if any, received by the
Corporation or its stockholders is in securities, the Corporation
shall have the option, at its election, of paying such Liquidation
Payments to the holders of the shares of Series B Convertible
Preferred Stock in cash or in a preferred security of the
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successor entity having terms substantially similar to the Series B
Convertible Preferred Stock.
(c) If upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series B Convertible Preferred Stock
shall be insufficient to permit payment to the holders of Series B
Convertible Preferred Stock of the Liquidation Payments, then the
entire assets of the Corporation to be so distributed shall be
distributed ratably among the holders of Series B Convertible
Preferred Stock. Upon any liquidation, dissolution or winding up of
the Corporation, after the holders of Series B Convertible Preferred
Stock shall have been paid in full the Liquidation Payments
respectively, to which they shall be entitled, the Series B
Convertible Preferred Stock shall be automatically canceled and the
remaining net assets of the Corporation may be distributed to the
holders of stock ranking on liquidation junior to the Series B
Convertible Preferred Stock.
(d) Written notice of such liquidation, dissolution or
winding up, stating a payment date, the amount of the Liquidation
Payments and the place where said Liquidation Payments shall be
payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier or
telex, not less than 10 days prior to the payment date stated therein,
to the holders of record of Series B Convertible Preferred Stock, such
notice to be addressed to each such holder at its address as shown by
the records of the Corporation.
(e) For purposes of this paragraph 4, a liquidation,
dissolution or winding up of the Corporation shall be deemed to
include (i) the Corporation's sale of all or substantially all of its
assets or (ii) the merger or consolidation of the Corporation into or
with any other corporation, in which all or substantially all of the
consideration received by the Corporation or its stockholders in
connection with such sale, merger or consolidation is: (x) in cash, or
(y) in securities of the acquiring company or an affiliate thereof
having a fair market value per share of Common Stock which is lower
than the Conversion Price (as defined below) as last adjusted and in
effect at the date of such liquidation, dissolution or winding up;
provided that a liquidation, dissolution or winding up of the
Corporation shall not include a sale, merger or consolidation in which
all or substantially all of the consideration received by the
Corporation or its stockholders in connection therewith is in
securities of the acquiring company or an affiliate thereof having a
fair market value per share of Common Stock which is equal to or
greater than the Conversion Price as last adjusted and in effect on
the date of such liquidation, dissolution or winding up.
(f) The Series B Convertible Preferred Stock shall, with
respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation, rank on a parity with
any class or series of capital stock of the Corporation hereafter
created which expressly provides that it ranks on a parity with the
Series B Convertible Preferred Stock with respect to distribution of
assets and rights upon the liquidation, dissolution or winding up of
the Corporation. The Series B Convertible Preferred Stock shall, with
respect to distribution of assets and rights upon the liquidation,
dissolution or winding up of the Corporation, rank senior to (i) the
Corporation's Series A Convertible Preferred Stock, $.01 par value per
share, and (ii) each class or series of capital stock of the
Corporation hereafter created which does not expressly provide that it
ranks on a parity with or senior to the Series B Convertible Preferred
Stock with respect to distribution of assets and rights upon the
liquidation, dissolution or winding up of the Corporation.";
(2) Amend paragraph 9(b) thereof by replacing the phrase "Series C
Convertible Preferred Stock" that appears therein with the phrase "Series B
Convertible Preferred Stock".
SECOND: That the Board of Directors of Integra, at a meeting held on
March 6, 2001, adopted the following resolution proposing and declaring
advisable certain amendments (the "Series C Amendment") to the Certificate of
Designation, Rights and Preferences of Series C Convertible Preferred Stock of
Integra:
RESOLVED, that this Board of Directors proposes and hereby deems
advisable that the Certificate of Designation, Rights and Preferences of Series
C Convertible Preferred Stock of Integra LifeSciences Holdings Corporation (the
"Series C Certificate"), be amended as follows:
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(1) Amend paragraph 7(a) thereof by replacing the phrase "Series B
Preferred Stock" that appears therein with the phrase "Series C Convertible
Preferred Stock";
(2) Amend paragraph 7(b) thereof by replacing the phrase "Series B
Preferred Stock" that appears therein with the phrase "Series C Convertible
Preferred Stock".
THIRD: That the stockholders of the Corporation, at an annual meeting
of stockholders called and held upon notice properly given in accordance with
Section 222 of the Delaware General Corporation Law, have adopted and approved
the Series B Amendment and the Series C Amendment in accordance with the
provisions of Section 212 of the Delaware General Corporation Law.
FOURTH: That the Series B Amendment and the Series C Amendment have
been duly adopted and approved in accordance with the provisions of Section 242
of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said Integra LifeSciences Corporation has caused
this Certificate of Amendment of Certificates of Designation, Rights and
Preferences of Series B Preferred Stock and Series C Preferred Stock to be
executed by a duly authorized officer of the Corporation this 15th day of May,
2001.
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
By:/s/ Stuart M. Essig
-----------------------------------------
Name: Stuart M. Essig
Title: President
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APPENDIX D
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
FOREWORD
The primary purpose of the Audit Committee (the "Committee") is to
assist the Board of Directors in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, by providing
oversight of the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal account and financial controls, and
the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and, subject to any action of
the Board of Directors, the power to retain outside counsel, auditors or other
experts for this purpose. The Board of Directors and the Committee are in place
to represent the Company's stockholders. Accordingly, the outside auditors are
ultimately accountable to the Board of Directors and the Committee.
The Committee charter should be reviewed by the Company's counsel and
approved by the Board of Directors. The Board of Directors and the Committee
shall review the adequacy of this charter on at least an annual basis and modify
the charter as necessary.
I. COMPOSITION
A. Committee members will be recommended by the Chairman of the Board and will
be designated by the Board of Directors.
B. The Committee shall consist of not less than three members of the Board who
meet the requirements of the audit committee policy of the NASD.
Accordingly, all of the members of the Committee will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within
a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
C. Committee members will serve until the Board of Directors shall designate
their successors.
D. To ensure that the Committee has continuity of membership from one year to
the next, Committee members will be appointed with the expectation that
they will serve at least three years. The Board of Directors will use its
best efforts to avoid the replacement of more than one member of the
Committee at a time.
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II. AUTHORIZATION
A. Regarding the Company's financial statements and the external audit of
same, the Committee is authorized:
1. Subject to any action of the Board of Directors, to select, evaluate
and, where appropriate, replace the Company's independent public
accounting firm (or nominate the independent public accounting firm
for stockholder approval in any proxy statement) with respect to the
audit of the financial statements for the then current fiscal year and
such other audit-related services as the Committee deems necessary.
2. To review, discuss and approve the overall scope of the external audit
for the then current fiscal year.
3. To review and discuss the results of the external audit.
4. To review and discuss the management report of the independent public
accounting firm regarding the external audit and the response by
management thereto.
5. To review and discuss the method of evaluation by the independent
public accounting firm of the adequacy and effectiveness of the
accounting procedures and internal accounting controls of the Company.
6. To review and discuss the audited annual financial statements of the
Company.
7. To review and discuss the financial statements included in any
securities offering.
8. To review and discuss the quarterly financial statements of the
Company.
9. To establish procedures which ensure that the Committee is advised on
a timely basis of any breakdown in internal accounting controls or
management fraud.
NOTE: The Company's Chief Financial Officer will inform the Committee
in writing of any material breakdown in internal accounting controls
or any management fraud.
10. To discuss recent Financial Accounting Standards Board, Securities and
Exchange Commission, or other regulatory pronouncements that might
affect the Company's financial statements.
B. The Committee shall:
1. request from the independent public accounting firm annually a formal
written statement delineating all relationships between the independent public
accounting firm and the Company consistent with Independence Standards Board
Standard 1;
2. request from the independent public accounting firm annually a formal
written statement of the fees billed for each of the following categories of
services rendered by the outside auditors: (i) the audit of the Company's annual
financial statements for the most recent fiscal year and the reviews of the
financial statements included in the Company's Quarterly Reports on Form 10-Q
for that fiscal year; (ii) information technology consulting services for the
most recent fiscal year, in the aggregate and by each
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service (and separately identifying fees for such services relating to financial
information systems design and implementation); and (iii) all other services
rendered by the outside auditors for the most recent fiscal year, in the
aggregate and by each service.
3. discuss with the independent public accounting firm any such disclosed
relationships and their impact on the independent public accounting firm's
independence; and
4. recommend that the Board of Directors take appropriate action to
oversee the independence of the independent public accounting firm.
C. The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of
the Company's financial statements. Management is responsible for
maintaining appropriate accounting and financial reporting principles and
policies and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The outside
auditors are responsible for planning and carrying out a proper audit of
the company's annual financial statements, reviews of the Company's
quarterly financial statements prior to the filing of each quarterly report
on Form 10-Q, and other procedures. In fulfilling their responsibilities
hereunder, it is recognized that members of the Audit Committee are not
fulll-time employees of the Company and are not, and do not represent
themselves to be, accountants or auditors by profession or experts in the
fields of accounting and auditing including in respect of auditor
independence. As such, it is not the duty or responsibility of the Audit
Committee or its members to conduct "field work" or other types of auditing
or accounting reviews or procedures or to set auditor independence
standards, and each member of the Audit Committee shall be entitled to rely
on (i) the integrity of those persons and organizations within and outside
the Company that from which it receives information from and, (ii) the
accuracy of the financial and other information provided to the Audit
Committee by such persons or organizations absent actual knowledge to the
contrary (which shall be promptly reported to the Board of Directors) and
(iii) representations made by management as to any information technology,
internal audit and other non-audit services provided by the auditors to the
Company.
D. The Committee shall review with management and the independent public
accounting firm the audited financial statements to be included in the
Company's annual report on Form 10-K and review and consider with the
independent public accounting firm the matters required to be discussed by
Statement of Auditing Standards ("SAS") 61.
E. As a whole, or through the Committee chair, the Committee shall review with
the independent public accountants the Company's interim financial results
to be included in the Company's quarterly reports to be filed with the
Securities and Exchange Commission and the matters required to be discussed
by SAS 61. This review will occur prior to the Company's filing of Form
10-Q.
F. The Committee shall prepare a report to be included in the Company's annual
proxy statement, which states:
1. Whether the Committee has reviewed and discussed the Company's audited
financial statements with management.
2. Whether the Committee has discussed with the independent public
accountants the matters required to be discussed by SAS 61.
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3. Whether the Committee has received written disclosures and the letter
from the independent public accountants required by Independence
Standards Board Standard 1 and has discussed with the independent
public accounting firm the independence of the independent public
accounting firm.
4. That the Committee, based on the reviews and discussions referenced
above, recommends to the Board of Directors that the audited financial
statements for the last fiscal year be included in the Company's 10-K.
G. The Committee is authorized to recommend, should it deem necessary, the
engagement of an independent public accounting firm to provide any
non-audit services, including the terms of the engagement, the cost thereof
and, if such firm has also been retained to provide audit services, whether
providing non-audit services will, in the opinion of the Committee,
adversely affect the independence of the independent public accounting firm
in carrying out its audit services.
H. The Committee is authorized to encourage access to the Committee by a
representative of the independent public accounting firm (generally the
engagement partner), and by the Chief Financial Officer of the Company.
Generally this is accomplished through private sessions with each of these
persons. In addition, the Committee may have a private executive session.
NOTE: By providing the independent public accounting firm a communication
channel independent of management, the Committee enhances the independence
of that firm.
I. The Committee is authorized to review the accounting policies, procedures
and principles adopted or continued by the management of the Company for
the purpose of:
1. maintaining or establishing the books, records, accounts and internal
accounting controls of the Company in compliance with the Foreign
Corrupt Practices Act of 1977, and
2. preventing or detecting:
a. any improper or illegal disbursement of Company funds or property
of value, or
b. the making of any arrangement on behalf of the Company which may
provide for or result in the improper or illegal disbursement of
funds or property of value, in order that the Company shall be in
compliance with the Foreign Corrupt Practices Act of 1977.
J. The Committee is authorized to establish an internal audit program and to
review the overall scope of the internal audit program thereafter. In
addition, the Committee is authorized to determine when it is appropriate
to establish an internal audit department. The Committee is also authorized
to review the overall adequacy of the internal audit function and the
competence of the personnel engaged in such function. This may include
reviewing staffing requirements, budgetary matters, and continuing
professional development. The Committee must approve the hiring or
termination of the director of the internal audit department.
K. The Committee is authorized to conduct investigations relating to financial
affairs, records, accounts and reports as the Committee may in its
discretion deem necessary, or as the Board of Directors may from time to
time request.
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L. The Committee is authorized to discuss the quality and depth of staffing in
the accounting, treasury and tax departments of the Company.
M. The Committee must be advised by management when the Company is seeking a
second opinion on a significant accounting/financial reporting issue.
N. The Committee is authorized to review the program that monitors compliance
with the Company's corporate code of conduct policy.
O. The Committee is authorized to review transactions between the Company and
members of the Board of Directors or management.
P. The Committee is authorized to report orally its findings to the Board of
Directors and will maintain written minutes of each Committee meeting.
III. INDEMNIFICATION
In the course of their service on the Committee, Committee members may
be made a party to a legal action or other proceeding resulting in a personal
economic loss to the member. In the event of any such loss resulting from their
service on the Committee, Committee members will be indemnified by the Company
to the maximum extent provided under Delaware law or in accordance with any
indemnification agreements between the Company and such Committee members.
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INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311C ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
PROXY - ANNUAL MEETING OF STOCKHOLDERS - TUESDAY, MAY 15, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stuart M. Essig and John B. Henneman,
III as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side
hereof, all the shares of Common Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock of Integra LifeSciences Holdings
Corporation (the "Company") held of record by the undersigned on April 9, 2001
at the Annual Meeting of Stockholders to be held on Tuesday, May 15, 2001 or at
any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED IN FAVOR OF PROPOSALS 2 THROUGH 6; FOR ALL NOMINEES LISTED FOR ELECTION
OF DIRECTORS UNDER PROPOSAL 1; AND IN ACCORDANCE WITH THE PROXIES' JUDGMENT UPON
OTHER MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
----------------------------------------------------------------------
|X| PLEASE MARK
YOUR VOTE
AS IN THIS EXAMPLE
1. ELECTION OF FOR all nominees WITHHOLD
DIRECTORS listed (except as AUTHORITY
NOMINEES: marked to the To vote for all nominees
--------- contrary below) listed at left.
Keith Bradley
Richard E. Caruso |_| |_|
Stuart M. Essig
Neal Moszkowski
George W. McKinney, III
James M. Sullivan
To WITHHOLD AUTHORITY to vote for any individual nominee(s), write the nominee's
name below:
__________________________________________________ FOR AGAINST ABSTAIN
2. Proposal to approve and adopt the Company's
2001 Equity Incentive Plan |_| |_| |_|
3. Proposal to ratify and approve all actions
taken by the Board of Directors on February
16, 2000 in connection with an amendment to
the Company's Certificate of Designation,
Rights and Preferences of Series B
Convertible Preferred Stock, the purpose of
which was to ensure that the rights and
preferences of the Series B Convertible
Preferred Stock would be substantially
identical to the rights and preferences of
the Series C Convertible Preferred Stock. |_| |_| |_|
4. Proposal to approve an amendment to the
Company's Certificate of Designation, Rights
and Preferences of Series B Convertible
Preferred Stock, the purpose of which is to
make certain changes to clarify the
numbering of certain paragraphs and
internal references contained therein. |_| |_| |_|
5. Proposal to approve an amendment to the
Company's Certificate of Designation,
Rights and Preferences of Series C
Convertible Preferred Stock, the purpose of
which is to make certain changes to clarify
the numbering of certain paragraphs and
internal references contained therein. |_| |_| |_|
6. Proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's
auditors for the current fiscal year. |_| |_| |_|
In their discretion, the Proxies are authorized, to the extent permitted by the
rules of the Securities and Exchange Commission, to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
SIGNATURE (S)____________________________________ DATE_______________________
NOTE: (Executors, Administrators, etc. should give full title)
PLEASE SIGN AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.